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Volume 4, Number 2 / June 2007

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Avoiding Professional Liability: Aiding and Abetting Client Wrongdoing and Other Liability Risks

These materials present a discussion of the ethical issues facing attorneys, financial advisors and other professionals engaged by insolvent (or allegedly insolvent) clients, and the creditors and other parties who deal with them. In particular, they discuss the merits of various theories under which parties have attempted to impose liability on such professionals.

A similar presentation, entitled “If you Can’t Do the Time …” – Bankruptcy Crimes and Fraud,” was given at the American Bankruptcy Institute’s Mid-Atlantic Bankruptcy Workshop held August 3-5, 2006, in Cambridge, Md. With the consent of the panelists for that presentation, their written materials are also included (the “Mid-States Materials”). The Mid-States materials provide an overview of the criminal enforcement efforts of the offices of the U.S. Trustee, as prosecuted by the Department of Justice, and various statutory provisions relative to bankruptcy crimes. They end with an overview of ethical considerations for attorneys generally, and speak to the ethical parameters set forth in the Model Rules, the Bankruptcy Code and also address separate but related fiduciary obligations.

Read the full outline (Materials from the 2007 Central States Bankruptcy Workshop)

Summary of State Rules/Opinions on Inadvertent Disclosure

Read the full outline originally published in the connection with the 2007 Annual Spring Meeting (Materials from the 2007 Annual Spring Meeting)

Real-World Hypotheticals for Bankruptcy Lawyers

HYPOTHETICAL 1:
“Alex, I’ll take ‘Conflicts Potpourri’ for $100, please!” Scene One: Your client, the lessor of several of the debtor’s retail stores in various states, tells you that the debtor’s law firm has sent documentation of a purported assumption and assignment of those leases to objectionable new tenants. Your client goes on to say that the law firm in fact represents it, the lessor, in pending matters in Florida. You look at the docket and find that the firm was approved as special counsel to sell “under-market” leases, and the firm represented that it had no conflicts of interest. Your client says, “That’s clearly a conflict, right? What should we do?”

QUESTIONS: Well, what do you say? Should you object to the special counsel’s engagement or fees? Should you report the conflict to the bar?

Read the full outline (Materials from the 2007 Southeast Bankruptcy Workshop)

2007 Annual Spring Meeting Minutes

On April 13th, ABI’s Ethics and Litigation Committees joined forces to present a program entitled “E-mail gone awry – Ethical Issues and Practical Problems that Arise in Litigation.” The panel was comprised of moderator, Judge Barry Russell (Bankruptcy Judge for the Central District of California); Terri L. Gardner, Poyner & Spruill LLP (Raleigh, N.C.); Ted Gavin, CTP, NachmanHaysBrownstein, Inc., (Wilmington, Del.); Karl Schafer, Esq., Carter Ledyard & Milburn LLP (New York) and Steven R. Skirvan, Dion-Kindem & Crockett (Woodland Hills, Calif.).

The panel addressed two interesting hypothetical situations based upon the inadvertent emailing of privileged information to an adverse party. Specifically, the panelist discussed the issues, problems and dilemmas that arose when an associate in a law firm accidentally sent an e-mail containing a confidential memorandum to opposing counsel. In the first hypothetical, the e-mail reflected, on its face, that the memorandum was confidential. In the second hypothetical, the e-mail did not contain clear language that would have alerted opposing counsel to the nature of the memorandum until counsel began reading it.

In order to determine the duties of opposing counsel with regard to the erroneously sent e-mail and memorandum, the panel considered ABA Model Rule 4.4(b), which provides that a lawyer receiving information that he/she knows was inadvertently sent shall promptly notify the sender of the receipt of the information. Also, the ethics rules and/or opinions in many states were discussed. Other than notification to the sender, the rules in most states do not provide guidance on whether the opposing counsel should read, not read or stop reading the e-mail upon learning that it was sent in error.

The panelist also addressed the various theories followed by courts to determine if the attorney-client privilege has been waived.  Specifically, the panel noted  FRCP 26(b)(5), effective as of Dec. 1, 2007, which provides that in litigation matters where privileged information is inadvertently disclosed, upon notice from the producing party the recipient “must promptly return, sequester or destroy” privileged information, may not use or disclose the information until any claim of privilege has been resolved and if, the recipient disseminated the information before being notified by the sending party, the recipient must take “reasonable steps” to retrieve the information. This rule does not resolve whether inadvertent disclosure waives the attorney-client privilege, but it does presume that the privilege exists. FRCP 26(b)(5) appears to take effect only on notice by disclosing party of the error.      

If a recipient reviews an inadvertently sent email and the court finds that the privilege was not waived, then the recipient—if opposing counsel—could be disqualified from representing her client. The panel discussed several relevant decisions and noted, among others, a court’s determination that, in an appropriate case, disqualification might be justified if an attorney inadvertently receives confidential materials and fails to conduct himself in the manner specified by case law, assuming that other factors compel disqualification.         

The audience participated actively in the discussion and provided first-hand accounts of inadvertent disclosures they had observed.  

At the conclusion of the panel discussion, Ethics Co-Chair Rick Meth invited participants to become actively involved in the various activities and opportunities provided by the Ethics Committee and encouraged the submission of articles to him or Co-Chair, Terri Gardner. Rudy Cerone, Co-chair of the Litigation Committee with Judge Russell, also invited participation in the Litigation Committee’s efforts to better serve its members.