A verein-teresting thought experiment? Part 2

So, if you missed Part 1 you can get up to speed here.  Now I indicated I’d get the underlying documents (plural) this weekend and finish this little thought experiment today, but I don’t actually practice in the International Trade Commission (shocking to hear I bet) so beyond getting to the order of disqualification itself, I’ve had no luck.  But, I’m okay with that, because just being able to read the full ruling itself has given me a better, fuller perspective on this situation.  Which, of course, is the reason you usually ought not write about things based solely on media reports of what a legal decision was all about.

The end result, for me, though is that I still do think it entirely fair, when applying RPC 1.0’s definition of a firm, to hold even the largest of law firms to how they brand and market themselves to the public.  Yet, given what else was going on in this particular decision, I don’t think this moment amounts to the kind of potentially earth-shaking ruling that the media reports focus on as a possibility.  That’s because while the decision about whether Dentons was one firm, or more than one firm (specifically, whether Dentons Canada, LLP and Dentons US, LLP would be treated as two different law firms), was integral to the ultimate decision to disqualify but I don’t happen to think it was the most important factor in the outcome.

First, a quick primer on the underlying factual situation.  Dentons US has been representing the complainants in this ITC investigation against The Gap.  The Gap has a problem with that because for over twenty years Dentons and a predecessor firm, Salans, have represented The Gap in other matters, including a contemporaneous engagement in Canada regarding customs compliance issues.  Dentons says the dual representation is not a problem because Dentons US and Dentons Canada should be treated as separate firms for purposes of conflicts and, even if not, The Gap’s engagement letter with Dentons Canada contains a waiver of potential future conflicts.  (On this point, the court really doesn’t spend any time addressing what the specific language said or why it was not sufficient.  The court appears to claim that Dentons US walked away from that argument in its briefing:  “Indeed, Dentons US asserts that ti does not rely on an advance waiver for establishing that a conflict does not exist.”

Nevertheless, what’s missing from the focus of the media reports is that Dentons had apparently acknowledged in writing to at least one of the clients in the ITC matter, RevoLaze, that it had an “existing conflict” because of Dentons Canada’s representation of The Gap.  This disclosure was made in connection with a funding agreement involving Dentons US, RevoLaze, and a third-party litigation funding company.  It is hard for me to read the opinion without thinking that this fact was the key tipping point for the court.

The rest of the opinion reads very much like the kind of piece in which, after weighing all of the competing factors, the court could have reached a conclusion not to disqualify despite concluding that there was a violation of RPC 1.7 but for the fact — weighed heavily by the court in favor of disqualification — that prior to the issue ever being raised by the court or by the Gap — Dentons had been concerned enough about it to raise it itself with the clients on one side but not the other.

Thus, I do still think that we’re likely headed down a path in which the efforts to find structures that would allow seemingly unlimited growth of the size and scope of modern law firms are going to put real pressure on the way conflicts of interest are regulated.  If the pressure brought to bear by such firms on the existing regulatory structure is not successful in changing the rules of the road, I do ultimately think firms will have to break into smaller pieces.

But I have a harder time seeing the ruling in this case as any sort of watershed moment because had Dentons managed to be 100% consistent in the position it ultimately took about whether there was a conflict or not, then they quite  likely could have avoided disqualification.  And, speaking generally, the ramifications of disqualification from lucrative engagements tend to have more impact on strategic thinking — and willingness to stake out aggressive positions on taking on conflicting engagements — in the large law firm domain then the risk that one or more individual lawyers may be at risk for exposure to disciplinary proceedings involving a conflict of interest matter.

A verein-teresting thought experiment? Part 1.

In preparation for a panel presentation coming up at the end of this month, I have been delving back into the complicated and contradictory world of disqualification rulings from around the country.  While the lay of the land is highly inconsistent to a large degree, there are some common themes that can be teased out of how courts deal with such issues.   I hope to find some way to help articulate that at that conference at the end of the month and, if the end product sounds like something that makes sense, will try to elaborate here as well.

For today though I wanted to touch on what might be the most important current one bubbling through the system – the ruling of an ALJ for the U.S Int’l Trade Commission disqualifying Dentons in a patent infringement suit and that, commensurate with its potential import for the mega-firms that proliferate in modern law practice, is generating some real publicity.

Several months ago now, I mentioned something in passing about a consultant who was talking about seeing 10,000 lawyer law firms in the future and the stress and strain conflicts of interest analysis can put on the outer limits of just how big a firm can get.  The vehicle it seems that the mega-firms have been counting on to make such things possible is the Swiss verein.  If you want to immerse yourself with the details and history of that structure, you can go here for a start.  Suffice it to say for the purposes of this post, I’ll stick with the shorthand description the ABA Journal uses in its article today:

 “[A] decentralized structure which allows independent legal entities to share marketing and branding while keeping finances separate.”

My immediate reaction every time I read something like that description, with conflicts of interest in mind, is that it certainly sounds fine in theory but, at base level, something either is one law firm or it is not one law firm.  So, in the back of my head, my thinking has been this: given how imputation of conflicts works under RPC 1.10 and the definition of a “firm” under RPC 1.0, either how a conflict of interest is defined for lawyers and imputed within a firm will have to be fundamentally changed or, at the end of the day, the Swiss verein concept will yield under the weight of problems of conflicts.

Normally, I like to thoroughly read the subject matter I write about before putting up a post, and I have not yet done that with the ruling of the USITC nor Dentons’ motion for reconsideration.  But I have a reason for that, and here comes my thought experiment.  My immediate reaction having only read the media pieces this week (including the quote from Karen Rubin who runs a wonderful blog you should check out here) is that it is absolutely fair to look at how a firm markets and brands itself for purposes of evaluating conflicts of interest.  Tennessee, for example, like many other states has built the concept into the Comment that accompanies RPC 1.0:  “However, if they present themselves to the public in a way that suggests that they are a firm or conduct themselves as a firm, they should be regarded as a firm for purposes of the Rules.”  RPC 1.0, cmt.[2].  We’ve had no problem using that paradigm to evaluate things on much smaller scales like whether a person being held out as “of counsel” to a law firm results in sharing of conflicts and all sorts of situations in which a group of lawyers share office space.

So, here’s the question I’m pondering, is there anything I can possibly read in those materials that would manage a good explanation for why that principle shouldn’t carry over to this situation and damn the consequences?  My plan is to work on tracking down the underlying documents and studying them this weekend and then following up with a post on Monday to “complete” this thought experiment.