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

Changing Firms; Screening (posted October 18, 2017) U.S. v. Anis Chalhoub, M.D., 2017 WL 4583250 (E.D. Ky. Oct. 13, 2017). Lawyer A and Lawyer B, both members of Law Firm, appeared for Defendant in this healthcare fraud criminal case. Lawyer A was disqualified because he had earlier represented Defendant’s employer. Lawyer B had not joined Law Firm until after that representation had ended. After Lawyer A was disqualified, Law Firm set up a screen and so notified its former employer client. Nevertheless, the government moved to disqualify Lawyer B and all of Law Firm. In this opinion the court reviewed Kentucky’s screening requirements and Law Firm’s screening procedures in detail, and denied the motion.

Former Client (posted October 18, 2017) Anderson v. City of New Brunswick, 2017 WL 4444194 (D.N.J. Oct. 5, 2017). In denying a motion to disqualify, both the magistrate judge and the district judge held that a freedom of speech and freedom of association suit was not substantially related to an excessive force suit.

Initial Interview; Rule 1.18
(posted October 16, 2017) Liu v. VMC East Coast LLC, 2017 WL 4564744 (E.D.N.Y. Oct. 11, 2017). Lawyer represents Plaintiffs. Early on, one of the defendants met with Lawyer and discussed this matter only in "the most general terms." Defendants moved to disqualify Lawyer. In this opinion the court denied the motion, applying N.Y. Rule 1.18 according to its terms, including the "significantly harmful" standard.

Standing
(posted October 14, 2017) Ambush v. Engelberg, 2017 WL 4541344 (D.D.C. Oct. 10, 2017). In this opinion the court denied a motion to disqualify because the movant lacked standing to make the motion. Fact-specific. The conflicts do not “affect the integrity of the proceedings” or movant’s rights to a “just determination.”

Bankruptcy
(posted October 10, 2017) In re Kretchmar, 2017 WL 4457446 (W.D. Okla. Oct. 4, 2017). Chapter 7. Certain parties sought disqualification of the law firm ("Law Firm") that is representing both Trustee and Creditor. In this opinion the bankruptcy judge denied the motion, but warned that if Creditor sought a security interest in any assets to the detriment of the unsecured creditors, Law Firm would be disqualified. The opinion contains what appears to be a good discussion of the relationship between Section 327(a) and Section 327(b) of the Bankruptcy Act. It also discusses the difference between an actual conflict and a potential one.

Bankruptcy (posted October 10, 2017) In re Shelnut, 2017 WL 4457440 (S.D. Ga. Oct. 4, 2017). Chapter 11. In this opinion the bankruptcy judge allowed in part and denied in part fees sought by counsel for Debtor. The court discussed the disclosure requirements regarding fees paid to counsel and the relationship of the payor to Debtor. The analysis was too fact-specific to be of much precedential value.

Former Client (posted October 10, 2017) Hibu, Inc. v. Peck, 2017 WL 4422661 (D. Kan. Oct. 5, 2017). Lawyers 1 & 2 previously worked at Firm A. Firm A has done extensive work for Hibu in other cases involving disputes with former executives of Hibu. This case, too, involves similar disputes and some of the same witnesses. There was no showing that Lawyers 1 & 2 worked on Hibu matters while at Firm A or learned anything about Hibu. Firm A, no longer representing Hibu, appeared for a defendant in this case adverse to Hibu. When challenged for having a conflict, Firm A withdrew from this case. Before Firm A's withdrawal, Lawyers 1 & 2 entered their individual appearances for the defendant. They, too, then withdrew. Lawyers 1 & 2 then left Firm A and joined Firm B, which is representing the defendant in this case. Lawyers 1 & 2 obtained permission to appear for defendant in this case. Hibu moved to disqualify Lawyers 1 & 2. In this opinion the court granted the motion. The court did not extend the disqualification to the entire Firm B, saying that a hearing would be required. [Our note: The court ruled that Firm A's conflict was imputed to Lawyers 1 & 2, even though there was no showing that Lawyers 1 & 2 ever acquired knowledge about the earlier Hibu cases. We are not sure that Rule 1.10 (the imputation rule) was designed to work that way.]

                                                               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.]

Nothing current.

CONFLICTS - UNCATEGORIZED

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

Lawyer May Represent Self (posted October 3, 2017) Herczl v. Feinsilver, No. 504440/13; 2014-07578 (N.Y. App. Div. Sept. 20, 2017). This is a breach of contract case against a lawyer arising out of the lawyer's business dealings. Lawyer/Defendant appeared for himself. Plaintiff moved to disqualify Lawyer. The trial court granted the motion. In this brief opinion the appellate court reversed. Citing a number of New York authorities, the court said that, absent a compelling reason,  lawyers may represent themselves.

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

(posted October 3, 2017) Smith v. Lindemann, No. 16-3357 (3d Cir. Sept. 21, 2017). At the outset of a marital representation, Lawyer had Client sign an agreement containing a broad arbitration clause. The clause did not contain the word, "malpractice." In this legal malpractice case, the trial court ordered the case to go to arbitration. In this opinion the appellate court affirmed. First, the court held that the arbitration clause was broad enough to include a legal malpractice claim. Second, the court held that, as to any claim that New Jersey law prevented enforcement of the arbitration clause, the Federal Arbitration Act pre-empted state law.

BANKRUPTCY (To read full article, click here)

(posted October 10, 2017) In re Kretchmar, 2017 WL 4457446 (W.D. Okla. Oct. 4, 2017). Chapter 7. Certain parties sought disqualification of the law firm ("Law Firm") that is representing both Trustee and Creditor. In this opinion the bankruptcy judge denied the motion, but warned that if Creditor sought a security interest in any assets to the detriment of the unsecured creditors, Law Firm would be disqualified. The opinion contains what appears to be a good discussion of the relationship between Section 327(a) and Section 327(b) of the Bankruptcy Act. It also discusses the difference between an actual conflict and a potential one.

(posted October 10, 2017) In re Shelnut, 2017 WL 4457440 (S.D. Ga. Oct. 4, 2017). Chapter 11. In this opinion the bankruptcy judge allowed in part and denied in part fees sought by counsel for Debtor. The court discussed the disclosure requirements regarding fees paid to counsel and the relationship of the payor to Debtor. The analysis was too fact-specific to be of much precedential value.

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.)

(posted October 18, 2017) U.S. v. Anis Chalhoub, M.D., 2017 WL 4583250 (E.D. Ky. Oct. 13, 2017). Lawyer A and Lawyer B, both members of Law Firm, appeared for Defendant in this healthcare fraud criminal case. Lawyer A was disqualified because he had earlier represented Defendant’s employer. Lawyer B had not joined Law Firm until after that representation had ended. After Lawyer A was disqualified, Law Firm set up a screen and so notified its former employer client. Nevertheless, the government moved to disqualify Lawyer B and all of Law Firm. In this opinion the court reviewed Kentucky’s screening requirements and Law Firm’s screening procedures in detail, and denied the motion.

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

(posted September 21, 2017) In re Insulin Pricing Litig., 2017 WL 4122437 (D.N.J. Sept. 18, 2017). The issue here was whether Law Firm had a conflict of interest preventing it from being appointed "interim class counsel." This is a fraud claim involving over-charging by pharmaceutical companies. At the same time Law Firm represents wholesalers against pharmaceutical companies in an antitrust class action. The court found that one representation did not conflict with the other under N.J. Rule 1.7(a)(2).

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 October 6, 2017) Carter v. Va. Dep't of Game & Inland Fisheries, 2017 WL 4413192 (E.D. Va. Sept. 29, 2017). Employment race discrimination case against Employer. Four plaintiffs. One plaintiff is the former HR Director for Employer. Defendant moved to disqualify the plaintiffs' lawyer. In this opinion the court denied the motion. First, the court noted that all the plaintiffs signed conflict waivers and that no plaintiff was making a claim against any other plaintiff. Also, among other things, the plaintiffs' lawyer averred that he believed that the testimony of the former HR Director would be favorable to the other plaintiffs rather than unfavorable, as claimed by Employer.

(posted September 21, 2017) Victorinox AG v. B&F Sys., Inc., 2017 WL 4149288 (2d Cir. Sept. 19, 2017). Trademark case. Law Firm represents Plaintiff, which was victorious in the trial court. Among other things, Defendants claim that Law Firm should have been disqualified because for about one year, while this case was pending, Law Firm represented a defendant on another matter. Law Firm has withdrawn from that representation. The trial court denied the motion to disqualify. In this opinion the appellate court affirmed. Evidently, no screen had been erected, but the court noted that neither trial team at Law Firm had exchanged information.

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 October 18, 2017) Anderson v. City of New Brunswick, 2017 WL 4444194 (D.N.J. Oct. 5, 2017). In denying a motion to disqualify, both the magistrate judge and the district judge held that a freedom of speech and freedom of association suit was not substantially related to an excessive force suit.

(posted October 10, 2017) Hibu, Inc. v. Peck, 2017 WL 4422661 (D. Kan. Oct. 5, 2017). Lawyers 1 & 2 previously worked at Firm A. Firm A has done extensive work for Hibu in other cases involving disputes with former executives of Hibu. This case, too, involves similar disputes and some of the same witnesses. There was no showing that Lawyers 1 & 2 worked on Hibu matters while at Firm A or learned anything about Hibu. Firm A, no longer representing Hibu, appeared for a defendant in this case adverse to Hibu. When challenged for having a conflict, Firm A withdrew from this case. Before Firm A's withdrawal, Lawyers 1 & 2 entered their individual appearances for the defendant. They, too, then withdrew. Lawyers 1 & 2 then left Firm A and joined Firm B, which is representing the defendant in this case. Lawyers 1 & 2 obtained permission to appear for defendant in this case. Hibu moved to disqualify Lawyers 1 & 2. In this opinion the court granted the motion. The court did not extend the disqualification to the entire Firm B, saying that a hearing would be required. [Our note: The court ruled that Firm A's conflict was imputed to Lawyers 1 & 2, even though there was no showing that Lawyers 1 & 2 ever acquired knowledge about the earlier Hibu cases. We are not sure that Rule 1.10 (the imputation rule) was designed to work that way.]

(posted October 8, 2017) Gentile v. Gentile, 2017 WL 4423508 (N.Y. Sup. Ct. Oct. 3, 2017). In this post-judgment divorce action, W moved to disqualify H's law firm ("Firm 2"). In this opinion the court granted the motion. During the actual divorce trial, Lawyer was with the six-lawyer firm ("Firm 1") that represented W. Lawyer did not participate in the case. Lawyer left Firm 1 and formed Firm 2. She is not participating in this case, either. Nevertheless, primarily because of Firm 1's "small firm atmosphere" there was too great a risk that Lawyer picked up W's confidences during the earlier divorce trial. Thus, Lawyer was disqualified for this case, and her disqualification was imputed to Firm 2.

(posted October 4, 2017) Anderson v. City of N.Y., 2017 WL 4382163 (S.D.N.Y. Sept. 29, 2017). Anderson brought this civil rights case against several jail guards for assaulting him in his cell. One of the guards had earlier been a party in an auto accident case. His lawyer in that case is Anderson’s lawyer in this case. The defendants moved to disqualify Anderson’s lawyer in this case. In this opinion the magistrate judge granted the motion. The guard had been injured in the auto accident. The guard is defending this case by claiming that Anderson attacked and injured him in Anderson’s cell. Thus, the cause of the guard’s injuries provided the nexus between the accident case and this case.

Duty of Loyalty

(posted September 29, 2017) Alters v. Villoldo, No. 3D17-715 (Fla. App. Sept. 6, 2017). This is a routine former-client, substantial-relationship case. The trial court refused to disqualify Lawyer. In this opinion the appellate court affirmed. The moving party admitted there was no “overlap” between the earlier matter and this one, but claimed that Lawyer violated his duty of loyalty to his former client. The appellate said that the only duty to the former client was that of confidentiality.

"Confidential Nonclient Relationship"

(posted September 22, 2017) Lynn v. George, 2017 WL 4173330 (Cal. App. Sept. 21, 2017). This case involves interactions among several real estate firms and law firms. The plaintiffs moved to disqualify the defendants' law firm. The trial court granted the motion, not because the law firm had a current or former client relationship with plaintiffs, but rather because the law firm had a "confidential nonclient relationship" with the plaintiffs. In this opinion the appellate court reversed. The analysis was hugely fact-intensive, and reviewing the facts here would serve no precedential purpose. The court discussed a leading California case on "confidential non client relationships," Acacia Patent Acquisition, LLC v. Superior Court, 234 Cal. App. 4th 1091 (2015), as well as Restatement Sec. 121, and concluded that the facts of this case were not consistent with those authorities.

Tax Court - Innocent Spouse

(posted September 21, 2017) Gebman v. Comm'r of Int. Rev., T.C. Memo. 2017-184 (T.C. Sept. 18, 2017). H and W filed joint returns. The IRS found a deficiency and assessed penalties. H and W appealed and appeared together pro se for a trial. Amidst much confusion the court offered a volunteer lawyer ("Lawyer") to represent H and W, which they accepted. Almost immediately after conferring with Lawyer, H declared that he owed the deficiency and penalty. Lawyer continued on behalf of W under the theory that she was an innocent spouse. H later reneged on his concession. One of the issues in this opinion was whether Lawyer had a conflict in continuing to represent W. The court concluded that he did under Model Rule 1.9(a) (Tax Court applies ABA Model Rules). The court found that H was a former client of Lawyer, that the representation of W was materially adverse to H, and that the earlier representation of H was substantially related to W's case. [Our note: In seventeen years of publishing this site, the is the first "innocent spouse" conflict case we have seen. There may have been others; we just did not encounter them. We have omitted here much arcana of federal taxation and Tax Court procedures appearing in the opinion. Tax practitioners in the audience might give the opinion a look.]

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.)

(posted September 19, 2017) Regal Cinemas, Inc. v. Shops at Summerlin No., LP, 2017 WL 4075760 (E.D. Cal. Sept. 14, 2017). Plaintiff, represented by Law Firm, sued Defendant for breach of contract and related remedies. Law Firm had earlier represented Defendant on unrelated matters. In October 2016 Law Firm sent to Defendant a letter informing Defendant that it had hired a lawyer who wanted to sue Defendant and that it was terminating its representation of Defendant "effective immediately." Law Firm later filed this suit. Defendant moved to disqualify Law Firm, relying on a "hot potato" theory. In this opinion the court denied the motion. In a fact-intensive analysis the court concluded that the matter mentioned in the letter had really ended earlier. Thus, this was really a former client matter, for which the "hot potato" doctrine would not apply. (The term "hot potato" does not appear in the opinion.)

INITIAL INTERVIEW - HEARING TOO MUCH (To read full article, click here.)

(posted October 16, 2017) Liu v. VMC East Coast LLC, 2017 WL 4564744 (E.D.N.Y. Oct. 11, 2017). Lawyer represents Plaintiffs. Early on, one of the defendants met with Lawyer and discussed this matter only in "the most general terms." Defendants moved to disqualify Lawyer. In this opinion the court denied the motion, applying N.Y. Rule 1.18 according to its terms, including the "significantly harmful" standard.

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

(posted September 25, 2017) Arden v. Forsberg & Umlauf, P.S., 2017 WL 4052300 (Wash. Sept. 14, 2017). Roff Arden shot and killed the Duffys’ puppy. The Duffys sued Roff under various tort theories, some alleging intentional misconduct and some claiming negligent conduct. Having a homeowners’ policy with Hartford, Roff turned the case over to Hartford. Ultimately, Hartford agreed to defend under a reservation of rights. Hartford hired Forsberg & Umlauf (“Forsberg”) to defend Roff. Ultimately, Hartford funded a settlement. Roff sued Forsberg for malpractice, saying that various delays were unreasonable and caused Roff injury. The trial court granted Forsberg summary judgment. The appellate court affirmed, holding that it was permissible for Forsberg to defend Roff even though Forsberg represented Hartford in other coverage cases. Second, the appellate court held that Forsberg did not have to disclose these representations to Roff. Last, the court held that Forsberg had no duty to pursue the settlement with the rapidity demanded by Roff. In this opinion the Washington Supreme Court affirmed, agreeing that Roff could show no damages. However, the Supreme Court disagreed somewhat with the appellate court's reasoning. The Supreme Court said that where the law firm has a long-standing relationship with the insurer, the possibility of a material limitation is present, thereby triggering the disclosure and consent duties contained in Washington Rules 1.9(a)(2) and 1.9(b).

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

Tax Shelter Penalties

(posted September 21, 2017) Tucker v. Comm'r Int. Rev., T.C. Memo. 2017-183 (T.C. Sept. 18, 2017). Lengthy opinion involving highly complex federal tax issues. In this opinion the court overruled an assessment of penalties notwithstanding that the taxpayer relied in part on the opinion of the infamous Brown & Wood partner, R.J. Ruble, who had opined on many such transactions and went to prison as a consequence. The court found that, on balance, the taxpayer reasonably relied on several sources and was under no duty to obtain "second opinions," etc.

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.)

(posted September 21, 2017) Gen. Sec., Inc. v. Commercial Fire & Sec., Inc., 2017 WL 4119622 (E.D.N.Y. Sept. 15, 2017). Law Firm represents Defendants in this commercial litigation. Lawyer is held out as "of counsel" to Law Firm. Plaintiff moved to disqualify Law Firm because of Lawyer's various relationships. We will not detail those relationships. In short, the magistrate judge, in this opinion, denied the motion to disqualify, finding that Lawyer's various relationships did not create a conflict. Of particular interest to this audience is the court's discussion of whether an of counsel's conflict would be imputed to Law Firm. The court ducked making a decision on that point. However, the court noted, and discussed, those authorities holding that not all of counsel relationships are imputed to the law firm. The court said the issue required a "case-by-case" analysis, in part examining the nature of the matter and the extent to which the of counsel was integrated into the law firm.

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.)

(posted October 14, 2017) Ambush v. Engelberg, 2017 WL 4541344 (D.D.C. Oct. 10, 2017). In this opinion the court denied a motion to disqualify because the movant lacked standing to make the motion. Fact-specific. The conflicts do not “affect the integrity of the proceedings” or movant’s rights to a “just determination.”

(posted September 22, 2017) Keane v. Jacksonville Police Fire & Pension Bd. Of Trustees, 2017 WL 4102302 (M.D. Fla. Sept. 15, 2017). This case is a claim by a former board person for enhanced pension benefits. Although the board is a creature of state law, and arguably separate from the city, the city's in-house lawyers appeared for the board. In this opinion the court denied Plaintiff's motion to disqualify those lawyers. The case revolves around Florida state and local government law, which we will not detail here. The court held that Plaintiff lacked standing because the lawyers' alleged conflict was not so "severe to call in question the fair and efficient administration of justice." Moreover, the court was influenced by Plaintiff's waiting until five months after the city lawyers appeared, and three months before discovery cut-off.

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.)

Passage of Time

(posted October 8, 2017) Zelda Enters., LLLP v. Guarino, 2017 WL 4400724 (Ga. App. Oct. 4, 2017). The trial court granted a motion to disqualify. In this opinion the appellate court returned the case to the trial court to make a determination whether the moving party had waived the "opportunity" to challenge the conflict by waiting too long.

Passage of Time

(posted September 22, 2017) Keane v. Jacksonville Police Fire & Pension Bd. Of Trustees, 2017 WL 4102302 (M.D. Fla. Sept. 15, 2017). Five months under the circumstances probably too long.

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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