Conflicts and Laterals — FaceTec Fails to Disqualify Opposing Counsel, Paralegal Conflict Called Not, Lateral Lawyer Vetting Risk Reviewed

Hat tip to Jim Burns at Latham for sending word of an update on this one: “‘Little Is Gained by Disqualification,’ Law Firm Concedes in Related Efforts Against GM’s Counsel” —

• “Following a magistrate judge’s ruling this week that denied a boutique Chicago law firm’s efforts to disqualify Fish & Richardson from representing General Motors Co. in a patent dispute, attorneys with Irwin IP withdrew similar attempts in a related but separate case.”
• “Attorneys from Irwin IP, a Chicago litigation firm, represent LKQ Corp. and its subsidiary, Keystone Automotive Industries, in patent disputes against GM. In one matter pending before U.S. District Judge Jorge Alonso of the Northern District of Illinois, the plaintiffs’ attorneys accused Fish & Richardson of poaching one of its former paralegals, Gloria Rios. Rios oversaw all LKQ matters, including the present adverse suit against GM, and is now working for the automaker’s counsel of record. Irwin IP moved to kick opposing counsel off the case, questioning whether Fish & Richardson’s screening and safeguards were enough to protect LKQ’s confidential information, among other things.”
• “U.S. Magistrate Judge M. David Weisman agreed that Rios’s permanent deletion of nearly 17,000 emails from her Irwin IP email was ‘troubling,’ but concluded this week that Irwin IP failed to allege that confidential information had been turned over to Fish & Richardson, or why an ethical wall should have been established sooner than three days before the paralegal’s start date.”
• “‘What is clear from this evidence is that F&R did not ‘target’ Ms. Rios for employment. Rather, she was one of twenty-five people [recruiter Dené] Maloney messaged about the paralegal vacancy at F&R. Further, though plaintiffs contend that F&R should have implemented the ethical wall sooner than the Friday before Rios’s Monday start date, they do not explain why doing so was necessary,’ Weisman wrote in an order filed Tuesday.”
• “‘In short, F&R has rebutted the presumption that Rios and F&R are sharing confidences with respect to LKQ/Keystone cases. Accordingly, the court denies plaintiffs’ motion to disqualify,’ Weisman added.”
• “In response to Weisman’s decision, Irwin IP attorneys withdrew a similar disqualification motion against Fish & Richardson in a related patent case pending before U.S. District Judge Jeremy C. Daniel.”
• “‘Accordingly, LKQ does not plan on objecting to Magistrate Judge Weisman’s order,’ Michael P. Bregenzer wrote in Wednesday’s filing. ‘As such, while it would be inappropriate to take advantage of this knowledge, GM’s counsel herein will be employing and working daily with an individual with intimate knowledge of LKQ’s litigation strategies and thought processes whether they are disqualified in this matter or not. Therefore, LKQ believes little is gained by disqualification in this matter at this point.’”
• “According to Irwin IP, Rios, who joined the boutique Chicago firm in January 2022, did not disclose that she was leaving for a role working with opposing counsel. It was no secret that Rios worked on the matter, as she sent ‘virtually every single one’ of the documents and pleadings, among other things, on behalf of LKQ to Fish & Richardson, Irwin IP said in a motion to disqualify opposing counsel in March.”
• “After Rio’s departure, Irwin IP said it discovered that Rios allegedly ‘spent hours’ permanently deleting at least 17,000 emails from her work email account, among other things. Irwin IP accused Fish & Richardson of violating professional obligations and questioned whether the firm’s screening methods and safeguards were sufficient, particularly because Rios was privy to LKQ’s confidential information across multiple matters.”
• “Fish & Richardson denied targeting Rios, as a recruiter reached out to the paralegal on LinkedIn during a ‘routine search for candidates’ with relevant experience, and Rios was one of nearly 25 potential candidates to respond to an initial inquiry. Rios went through the interview process and was hired to work for Louis Fogel, GM’s counsel of record in the patent suit, LKQ Corp. v. General Motors Co. Rios said that she informed Fish & Richardson about her participation in adverse litigation, and she executed a declaration acknowledging her ethical obligations on Jan. 28, the day before she put in her two-week notice with Irwin IP.”
• “On Feb. 21, Fish & Richardson sent a firm-wide email with a screening memorandum and notification to all personnel about the ethical wall and their obligation not to share any covered information with Rios. Fish & Richardson’s ethical wall software blocks an employee from accessing the litigation document management system, according to the opinion.”

And to industry consultant and form biglaw risk director David Skweres for noting: “Lateral Partner Vetting Intensifies as Compensation Creeps Upward” —

• “As Big Law partner hiring—and compensation packages—grow increasingly expensive, lateral vetting has generally grown more complex over the last several years, recruiters and lawyers say.”
• “Law firms are becoming more inquisitive about laterals, asking them to go beyond basic background checks and routine lateral partner questionnaires (LPQs). They are asking lateral candidates much more probing questions about their client lists, originations, and profitability of practice, as well as explicit questions about the percentage chance specific clients will move with them, industry observers say. Some laterals, in turn, have hired lawyers to represent them in moves.”
• “Amid an exponential increase in partner compensation, especially that offered to ‘superstar’ lateral partners, making the wrong lateral investment can be costly to a firm’s bottom line these days. Depending on overall revenue and profitability levels, some firms have even less room to hire unsuccessful laterals than others.”
• “‘Compensation has skyrocketed, and [firms are] just trying to do as much due diligence as possible,’ said Brian Davis, a recruiter who is a Major Lindsey & Africa partner and global liaison for New York and London partners. ‘Laterals can be a big investment for firms. They want to make sure they get it right.’”
• “Jon Lindsey, New York founding partner at MLA, also said some firms do a ‘mini’ questionnaire, earlier in the process than ever before. Even something as simple as ‘‘Tell us your top 10 clients and what you do for them.’ That sort of a thing, as a conversation-starter,’ Lindsey said.”
• “Questions pertaining to profitability and portability—for instance, if anyone else gets origination credit for clients that a lateral lists as their own, and how likely a client is to follow along if a lateral makes a move—are part of firms’ move toward making savvier evaluations. Already, some in the industry have sought to create universal or common lateral questionnaires, Law.com has reported. But those efforts for a standard questionnaire come as firms are increasingly inquisitive as part of their own hiring process.”
• “‘As the lateral market has become very robust in the last 10 years, the firms have each become far more sophisticated than they used to be in terms of which metrics and other mechanisms they use to assist them in their lateral partner process,’ said Tina Solis, a litigation partner at Nixon Peabody who routinely counsels lawyers and law firms on their ethical and fiduciary obligations in connection with lateral partner moves. ‘Because the firms have become more sophisticated in how they recruit laterals, they’ve become far more inquisitive in the types of questions they ask the lateral partner candidates.’”
• “Jennifer Gillman, a lateral partner recruiter and president of Gillman Strategic Group in Westfield, New Jersey, said some firms will ask laterals to estimate the percentage chance specific clients will move with them. Others will tell them to describe what they think their business will look like on the new platform and what the range of outcomes might be. What does a great year look like? How about an average year and a terrible year?”
• “‘We usually counsel our candidates to think long and hard about those numbers,’Gillman said. ‘We don’t want them just to guess, because those are kind of the levels they’re going to be held to.’”
• “She added, though, that it’s a ‘delicate dance’ for firms. Make the process too onerous, and you risk alienating the candidate, particularly if they’re already deciding between multiple firms.”
• “Dan Binstock, a recruiter and partner at Washington, D.C.-based Garrison, agreed, although he described firms walking a fine line between gathering enough data to make an informed decision on a lateral hire with the ethical and fiduciary duty obligations of that candidate.”
• “‘Overall, I do see firms asking more explicit questions, or at least better defining their questions,’ Binstock said. ‘Firms have to balance their LPQs so they ask the right questions to help them evaluate a partner’s practice and find the sweet spot on compensation, while not digging too deep such that it goes beyond what’s ideal from an ethics and disclosure standpoint. It’s a delicate balance.’”
• “As such, candidates have taken to bringing ethics counsel into the mix during this stage of the lateral hiring process to avoid crossing any disciplinary boundaries.”

“FaceTec Fails to Disqualify Morrison & Foerster in Patent Dispute Amid Conflict of Interest Concerns” —

• “In a recent ruling, FaceTec Inc., a company focused on 3D face authentication, encountered a setback in its legal battle against legal giant Morrison & Foerster LLP, as the U.S. District Court refused to disqualify the firm from continuing its representation in a patent infringement case. FaceTec had previously sought to disqualify Morrison & Foerster, arguing potential conflicts of interest due to the firm’s prior engagement with FaceTec on unrelated matters. However, the court determined that the connections were not substantial enough to warrant disqualification.”
  “The ruling from Judge Cathy Ann Bencivengo in the Southern District of California emphasized that the prior interactions of the firm did not pose any serious risk of revealing confidential information that might disadvantage FaceTec in the current proceedings. This decision provides a noteworthy instance of how courts evaluate the intricacies of attorney-client relationships and conflicts of interest, maintaining a delicate balance between past engagements and current representation. Details of the case can be found through Bloomberg Law.”
  “Patent disputes like those faced by FaceTec underscore the complexities surrounding representation in intellectual property law, especially when previous client interactions come into play. The decision showcases the rigorous standards applied by the judiciary to ensure fair representation without granting the potential for misuse of sensitive information.”
  “This case adds to a series of recent rulings that highlight similar issues of conflict in legal representation. For example, a recent decision involving Qualcomm Inc. illustrated how courts approach potential conflicts with a view to preserving the integrity of legal counsel, a critical aspect given the increasing intricacies of modern legal practices. More information about how courts handle such disqualification attempts can be found on Law.com.”
  “Overall, FaceTec’s attempt to disqualify Morrison & Foerster from the case encapsulates ongoing challenges in patent litigation and the broader legal landscape’s efforts to navigate the complexities of attorney-client relationships. As the case progresses, it will be closely watched by legal professionals who seek to understand the evolving standards for conflict management in high-stakes litigation.”