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Trojan Rabbits

Most of us associate DQ motions with conflicts.  That’s true, of course.  But a recent decision disqualifying a law firm from a pair of legal malpractice cases had nothing to do with conflicts.  Rather, the court disqualified the firm based on its misuse of an inadvertently produced privileged document.  Upon receiving an email containing legal advice from the opposing party’s attorney in the underlying proceeding, the attorneys failed to notify their opponents. Instead, according to the DQ motion, they retained the document, allowed their client to review it to prepare for a deposition, and used it to question opposing party deponents about the legal advice it contained. The court criticized the conduct as affecting not only the privilege holder’s rights, but also “the integrity of these judicial proceedings and public confidence in them.”

To avoid this unpleasant predicament, lawyers should be aware of their duties relating to inadvertently produced documents. While requirements can vary by jurisdiction, guidelines to keep in mind are:

* Notify. Rule 4.4(b) of the Model Rules of Professional Conduct requires an attorney receiving a document that appears to have been inadvertently sent to promptly notify the sender to permit that person to take protective measures.

* Plan Ahead. Rule 26(f)(3)(D) of the Federal Rules of Civil Procedure requires the parties to confer at the outset of the case about the handling of privileged documents, including whether to enter a stipulation or secure a court order governing inadvertently produced documents.

* Return, Sequester, or Destroy. Rule 26(b)(5)(B) of the Federal Rules of Civil Procedure, in turn, requires a party that has been notified it has received privileged material to “promptly return, sequester, or destroy the specified information and any copies it has,” to refrain from disclosing and using such information, and also to take reasonable steps to retrieve the information from any third parties to whom the receiving party disclosed it.

So when you seemingly receive a “gift” from your adversary, be careful.  It could have unintended negative consequences.  Then again, maybe not.

 

 

 

Holidays

July is a big month for holidays.  There is Independence Day, of course.  Many of our colleagues around the globe have their own celebrations too:  Canada Day, Bastille Day, Ivan Kupala Day.  And to capture the full polycentric nature of the month, July 11 is World Population Day.

And then there are the Hallmark holidays that July brings:  Friendship Day, Moon Day, Cow Appreciation Day.  There’s even a National Spinach Day followed, naturally, by National Ice Cream Day.   Personally, I’m looking forward to July 13:  Barbershop Music Appreciation Day.

All these holidays give us a great excuse to go on, well, holiday.  But as we look forward to hitting the beach, the lake, or whatever destination you choose, let’s remember that life goes on back at the office.  Clients, adversaries, and courts don’t necessarily share (or respect) our vacation schedules.

So before loading up the Family Truckster and heading out to Wally World, make sure you do the following:

*Check email and voicemail.  Unless your vacation spot is the North Pole or you otherwise have no connectivity, check your email and voicemail at least a couple of times a day.

*Have an appropriate out-of-office auto response.  If you will be completely offline or will be delayed in responding, make that clear.  You should also change your outgoing voicemail message.

* Make sure someone on your team is on point.  Whether it’s a client call or a motion that gets served,  ensure that someone with knowledge of the matter is poised to deal with any issue arises (and not just put things off til you return).

*Inform your clients.  While you need not give out your itinerary, clients will appreciate knowing in advance that you will be unavailable and knowing who to contact in your absence.  And if you tell them where you are going, they might even have good restaurant recommendations.

*Make sure someone is checking your regular mail for important correspondence.  Yes, some people still use mail.  Don’t let an unopened notice or letter with a seven-day deadline for responding sit on your desk unopened.

*Bring plenty of sunblock.

Once you’ve taken these steps, feel free to enjoy your Independence Day, National Chocolate Day, or Lollipop Day.  Or Green Day.

 

License to Drive, License to Practice

My son got his driver’s license the other day (not Bart Simpson, the older one).  While he waits for a brand new Mustang to magically appear in the driveway, he’s been studying New York’s laws about what he can and cannot do with a junior license:  no highway driving; no driving past 9 pm without an adult; no driving with two or more non-family member passengers.  And those are only the state rules; he’s had to familiarize himself with the parental laws as well:  no refusing to pick siblings up from their respective activities; no driving above 20 mph (ever); no changing the pre-set radio stations.   (Note:  no texting while driving is also very much a parental rule — as well as a Firm policy — but one about which I don’t joke.)

Lawyers likewise would be well-served spending some time reviewing the licensing requirements that govern their practices.  In this frequent flier economy, lawyers sometimes cross state borders without considering the implications of practicing in a jurisdiction in which they are not admitted.  And state bar regulators are taking note — an increasing number of lawyers are being disciplined for engaging in the practice of law without being licensed in the jurisdiction in which they practice.  Some states have set up special committees tasked with monitoring lawyers and law firms to ensure that lawyers who practice in their states are not improperly holding themselves out (explicitly or implicitly) as being admitted to practice.  Some even troll law firm websites looking for violators.

Nor is it a matter of just being licensed in the state in which you sit.  A California lawyer was recently disciplined after he was found to have violated the unauthorized practice rules of other states by implicitly holding himself out as being admitted to practice in those states, even though he never left California.

And what’s a really easy way to get snagged for UPL?  Failing to renew your registration.  That too can have some real world consequences, including suspension. 

So like my son (who’s still waiting for that Mustang), take some time to ensure that you are complying with your licensing requirements.  And while my son’s studying no doubt has paid off, like the cautious parents that we are, we asked some of our friendly local law enforcement officials to keep an eye out for him on his first solo drive.  We’re so proud.

 

 

 

 

Stoicism

More than once, the Risk Tip has been inspired by the Futility Closet blog.  The Blog once commented about British stoicism during The Great War, which stereotypically tended to downplay the horrors of the conflict in favor of a “stiff-upper-lip” attitude.  Wrote one officer:  “Nothing is ‘horrible.’ That word is never used in public. Things are ‘darned unpleasant,’ ‘Rather nasty,’ or, if very bad, simply ‘damnable.”  Other examples provided were from a General who reported that his daily constitutional was interrupted by shrapnel that “scattered a shower of bullets around me in an unpleasant manner” and a Private who wrote to complain about the “strafing and a certain dampness.”

One manifestation of this was a postcard provided by the British Army to wounded soldiers:

Mail

Soldiers were simply to strike out inapplicable text, and were thus hindered from writing things like “I’ve lost my leg.”

What does this have to do with Risk?  Well, if you’re an attorney with the Department of Justice, you might have to display that same sort of stoicism regarding a recent order from a District Judge in Brownsville, Texas — at least until the inevitable appeal.

Yesterday, the Court concluded that DOJ attorneys appearing before him had failed to exercise their duty of candor to the tribunal.  In a scathing opinion, the Court not only revoked the pro hac vice status of the DC lawyers (suggesting some regret he simply couldn’t disbar them), but also entered an order requiring “any attorney employed at the Justice Department in Washington, D.C. who appears, or seeks to appear, in a court (state or federal) in any of the 26 Plaintiff States annually attend a legal ethics course.”  Going on, the judge ordered:

The Attorney General of the United States shall appoint a person within the Department to ensure compliance with this Order. That person shall annually file one report with this Court including a list of the Justice Department attorneys stationed in Washington, D.C. who have appeared in any court in the Plaintiff States with a certification (including the name of the lawyer, the court in which the individual appeared, the date of the appearance and the time and location of the ethics program attended) that each has attended the above-ordered ethical training course. That certification shall be filed in this cause during the last two weeks of each calendar year it covers. The initial report shall be filed no later than December 31, 2016. This Order shall remain in force for a period of five years (the last report being due December 31, 2021).

Those who practice the litigation arts know that few things are as unpleasant as a judge who has turned against them.  The Tip is to recognize that the conduct of a single lawyer can have broad implications for one’s colleagues, no matter where they practice.

Att. to Time Entrys

My eighth-grader just showed me his homework.  His assignment is to write a paper describing what he did over Spring break.  Here is what he wrote:

Day 1 – Baseball.  TV. Spoke with people. More TV.
Day 2 – Baseball.  Textd friends.  Textd Sam.  Dinner.
Day 3 – Baeball. Did stuff.
Day 4 – Baseball.  More stuff.  Also did PLSTN.
Day 5 – Ball and Watched TV
Day 6 – Baseball, rd book a little
Day 7 – Dd more of stuff I did on Day 4. Oh, and baseball too.

He thinks his teacher will be very impressed.  I’m not so sure.

See where I’m going with this?  Time entries should include narratives that convey to the client the value that you are contributing each day.  Descriptions should explain the services provided, how the assignment relates to the engagement, and why the time of a professional at your level was needed.

Proofread for accuracy, punctuation, and spelling.  Each time entry should be treated with the care appropriate to any other important communication with a client.

Back to my son.  Not surprisingly, his paper was not well received and he was made to stay after school and complete another task.  A good lesson for us all.

Bart Simpson

Dredgers, Enquiries, and Wire Transfers

It’s a real boost to the legal ego when a foreign company chooses you to handle a major transaction or litigation in the US.  Even better, it’s a brand new client.  And just to be safe, you google them and confirm they are a legit company.

I hate to burst the bubble folks, but it ain’t real.  Here’s how it works:   You get an  email from someone (usually from a foreign country) who seeks a lawyer to assist with debt collection or a transaction and they your name from a bar association or our website.   After a brief communication, your are informed that the adverse party has sent a settlement check or deposit.  The unsuspecting lawyer then deposits the money and wires the proceeds to his “client,” only to later discover that the check was phony.  Of course, the firm’s money that he just wired out is not.

These and other email and telephone scams (often involving wire transfer requests) are becoming more prevalent and lawyers — including at large firms — are falling prey to them all the time.  Recently, a victimized lawyer lost his bid to shift responsibility to his bank.  And bar associations opinions are starting to weigh in as well, suggesting lawyers may have ethical obligations to inform other clients if they are victimized.

Here are some red flags that will tell you whether an unsolicited email is a phony:

*They come from what purport to be foreign companies (or individuals) seeking an attorney in the United States;

*The names of the companies and individuals are legit — but the emails are sent from a gmail, yahoo or similar domain;

*The emails identify no referral source;

*They grammar be not well; and

*They promise lots of money for little work.

If you receive one of these emails, you’re better off just deleting it.

For information on another scam that is making its rounds, please review the attached important tutorial.

 

Wasted on the Way

“[Crosby and I]  were in love with each other and in possession of something magical.”  Graham Nash, 1990.

“I don’t want anything to do with Crosby at all . . .  I’m done.  F**k you.”   Graham Nash, March 2016.

I could tolerate last year’s war of words between David Crosby and Neil Young.  And sure, there has always been tension with that hothead (but genius) Stills.  But for Crosby Stills & Nash fans, a  Crosby/Nash rift is a surprising and devastating turn of events.   After 47 years together, having weathered drug addictions, prison stints and liver transplants, I, for one, was unprepared for the split.  So much for “Love the One You’re With.”

Lawyers can’t afford to be caught off guard when their clients break with one another.  Whether it’s a husband and wife,  business partners, or a corporation and its employee, we are often asked to represent multiple clients in a single matter.  At the outset of the representation, everyone is seemingly on the same page and happy.  As the matter evolves though, interests can diverge and once agreeable clients can descend into the darkness while the seemingly helpless lawyer watches.

So what do you do when one client wants copies of your communications with the other?  Or when one client stops paying?  Or when one wants you to fire the other and continue to represent him or her?   You don’t have to cry; these questions can be really easy to answer — if you have a fully executed engagement letter with appropriate disclosures and consents.  Specifically:

Everybody I Love You: Have the clients confirm that their interests are aligned.

50/50: Be clear on the responsibility for payment of fees.  Are they split evenly or is one paying for all?

Yours and Mine: Explain the disadvantages of joint representation, including that there is no privilege as between or among joint clients.  In other words, if we learn something from one client that we think the other needs to know, we will disclose the information to the other.

See The Changes: Be clear on what happens if a conflict develops.  Are we going to withdraw from the representation?  Or will we withdraw from representing one (e.g., a corporate officer), but continue representing the other (e.g., the company)?

Turn Back the Pages: Make sure the letter is executed by each of the clients.

This way, if and when your clients go CSN on you, you’ll be able to carry on.

And, for what it’s worth, anytime CSN are ready to get back together,  they can count me in.

crosby

Enter Sandman, Exit Lawyer

Ok, so not everyone is an opera fan.  Thankfully, we at the Risk Tip enjoy a wide variety of musical tastes.   Unfortunately, that also means that we’ve had a lot of musicians to mourn in recent weeks:  David Bowie.  Natalie Cole.  Glenn Frey.  Dale Griffin (of Mott the Hoople).  Lemmy Kilmaster.   All of these talents are worthy of tribute.

Of course, there are those who make it their life’s work to pay to tribute to musicians.  And we’re not just talking Elvis impersonators.  Some tribute bands are made up of serious musicians who rival the band or performer they seek to emulate.  My favorites though, are the ones that introduce a bit of a twist on the original.  Have you ever wondered how Back in Black would sound sung by women?  Try AC/DShe.  Would you like to hear Like a Virgin sung by a baritone? Then the all-male Mandonna is for you.

Alas, tribute bands rarely get their due.  But one of them came out on top this week.  The Metallica tribute band Sandman (named for the song Enter Sandman) made news after it received a 41 page cease and desist letter from Metallica’s lawyer, threatening legal action over claimed trademark violations.  Fortunately for Sandman, Metallica’s members professed to know nothing of the letter and, as luck would have it, they are fans of Sandman.  They announced on their website that Sandman could throw the letter in the trash.   As the band explained:  “[N]either we nor our management were aware of [the letter] until it surfaced online. [It] turns out that we have a very overzealous attorney who sent this letter without our knowledge.”   Where is the attorney now?  He’s “catching a flight to go permanently ice fishing in Alaska,” said the band.

The erstwhile Metallica lawyer better hope that’s the last of it.  ABA Model Rule 1.2 makes clear that the client, not the lawyer, generally has the authority to make decisions (subject to legal and ethical limitations) regarding the representation.  Whether it’s accepting/making a settlement offer, agreeing on material transaction terms, or sending a cease and desist letter, it’s the client’s call, not the lawyer’s.  And unless you want to end up ice fishing in Alaska — or be subject to discipline or a claim —  it’s always best to document the client’s instruction.  Because if there is a dispute later on, you don’t want to end up like another Metallica song:  Broken, Beat and Scarred.

Heavy metal, like opera, is not for everyone.  But fear not, classical music fans.  This week’s clip features the soothing sounds of the San Francisco Symphony Orchestra.  And Metallica.  Together.  Enjoy.

 

Great Moments in Opera (No. 1)

As we enter a New Year, it seems appropriate to heighten the cultural level of the Risk Tip.  Sure, Dr. Seuss is fun.  And who doesn’t enjoy reports of the latest Kardashian exploits.  But perhaps it’s time to employ high culture over pop culture to convey risk management advice.

To that end, I went to the opera over the holiday break.  Though not my favorite, Rossini’s The Barber of Seville is an enjoyable romp with a suitably ridiculous plot characteristic of opera buffa.  The rich Count Almaviva falls for the beautiful Rosina, ward of the lecherous Dr. Bartolo who has his own designs on Rosina, whom he keeps under lock and key.  Wanting to be sure Rosina doesn’t just fall for him because he’s rich, Almaviva poses as the poor student Lindoro.  Almaviva/Lindoro and the wily Figaro hatch a series of schemes aimed at foiling Dr. Bartolo and uniting the two lovers.  Operatic hilarity (as oxymoronic as that may sound) ensues.

A minor, but pivotal, character is the notary who is brought in in the final scene to officiate at the wedding.   Here’s where I could no longer suspend my disbelief.  Il Notaio made no effort to verify the identities of Almaviva or Rosina.  Operatic license is one thing, but this was taking things a bit too far.

Every jurisdiction has its own rules applicable to when and how a document can be properly notarized.  But a basic requirement is that the notary verify the identity of the party signing a document.   Not only notaries, but lawyers who direct them, can face severe consequences for failing to comply with notarial requirements.  These include criminal penalties, sanctions, and attorney discipline.  As one federal court recently observed when sanctioning a notary and his law firm employer for improperly notarizing an affidavit: “The administration of an oath by a notary public and the notary’s attestation to the same is not merely a quaint custom mindlessly carried over from ancient precedents.”

In other words, no shortcuts.  Notaries need to know the applicable laws and should not notarize a document contrary to those laws — even if asked.  And lawyers and other professionals who utilize notaries likewise need to ensure that appropriate arrangements are made to comply with the relevant notary laws and defer to notaries on the limits of what they can and cannot do.

Thankfully, Rossini’s notarial transgressions had little impact on the success of Il Barbiere.  Indeed, the most difficult part of writing this Tip has been finding the most compelling performance to attach.  After wading through so many wonderful clips featuring Callas, Domingo and others, the attached seems most appropriate.

Tune in next week when we discuss Puccini’s La Boheme and the risk management lessons derived from Mimi’s battle with tuberculosis.  It’s sure to be a crowd pleaser.

 

5000% More

MSThere is one thing that unites Democratic and Republic presidential candidates these days:  a dislike of Martin Shkreli.

Shkreli is the “Pharma Bro” CEO whose company increased the price of one of its products from $13.50 to $750, a 5000% increase that caused the kind of internet outrage previously reserved for American dentists who kill large game in Africa without a license.  Hillary Clinton tweeted that Shkreli’s “price gouging … is outrageous.”  Donald Trump called him a “spoiled brat” who “ought to be ashamed of himself.”

Shkreli engendered another round of internet ire last week after it was revealed he paid $2 million for the only copy of an album by the Wu-Tang Clan, then told media that he had no plans to listen to it.

Yesterday, Shkreli was arrested on securities fraud charges.  One internet commenter pointed out a valuable Risk Tip:  “This investigation must have been going for a while and Shkreli must have known about it. So at some point he decided the best way to help his image before trial was … alienating every single human being in the country.”

But, Shkreli was not indicted alone.  Criminal charges also were brought against a well respected corporate lawyer.

The indictment asserts that Shkreli and the lawyer schemed to engineer a series of fraudulent transactions to disguise the financial health of Shkreli’s enterprises.  Among other things, the indictment alleges that they, in an effort to deceive company auditors, concocted several phony “consulting agreements” with individuals who had asserted claims asserted against Shkreli and his hedge fund, which were funded by assets of a company not responsible for those claims.

The indictment uses the email exchange between lawyer and client to paint an unflattering picture:

When SHKRELI suggested that the old agreements should be annulled, [the lawyer] responded that the auditor “didn’t like that idea.” When SHKRELI then admitted that “there were serious faults with the [settlement] agreements including lack of board approval” and that redoing the settlement agreements may be a good idea, [the lawyer] responded:  “That will open up some very big issues. The current thinking is let rtrx pay, get a note from the fund[,] and if the fund cant [sic] fulfill the note[,] rtrx will write it off as a bad debt. It would be easier than the road you are referring to. Also, [the auditor] would get very spooked with what you are talking about (which could also spook your investors and counter parties).” In response, SHKRELI stated, “[o]n current thinking: that works for me.”

Later, the indictment alleges:

Initially, [the lawyer] sent an email to SHKRELI informing him that Investor 1 wanted 100,000 RTRX shares as part of his settlement and did not want to enter into a consulting agreement. When SHKRELI indicated that the proposal was acceptable to him, [the lawyer] stated, “Where will the 100k come from? If it’s from the company it would need to be in a consulting agreement.” SHKRELI questioned [the lawyer’s] approach and stated, “Why would it need to be a consulting agreement???! Have you heard of the term settlement?” In response, [the lawyer] explained, “We can call it a settlement agreement, but given [the auditor’s] recent behavior they may require it to be disclosed in the financials. I was trying to prevent that issue.”

Of course, these are only allegations, and the defendants are presumed innocent unless and until proven guilty.

The arrest of Martin Shkreli will likely find its place on anyone’s year-end top-10 internet-villain schadenfreude list, and it may be one of those rare times where there is more sympathy for the attorney.  If there’s truth to the indictment, it serves to further underscore the principle that the Risk Tip has been talking about for years:  the greatest risk of claims against lawyers arise in matters where the lawyer represents a bad client.

Lastly, we will end with an ethical take-home test:  Model Rule 1.5 prohibits a lawyer from charging an “unreasonable” fee.  Would it be ethical for a lawyer to increase his or her rates by 5000% before agreeing to defend Shkreli?