Conflicts & DQ News — Previous Investigation Provokes Law Firm Disqualification Move, Canadian Judge Conflicted, Firm Accused of Turning on Ex-client

“Law firm Quinn Emanuel accused of turning on ex-client in fintech case” —

• “A financial technology provider previously represented by Quinn Emanuel accused the law firm of betraying its loyalties and violating ethics rules by taking the case of a former executive suing the company over his termination.’”
• “In a filing in the case in California federal court on Thursday, Pagaya Technologies asked a judge to disqualify Quinn Emanuel from representing Hugh Edmundson in the lawsuit he filed in June.’
• “In the new filing Pagaya and its hedge fund affiliate Theorem Technology accused Quinn Emanuel of breaking attorney ethics rules in its new work for Edmundson, a former top executive at Theorem. Pagaya had acquired Theorem last year.’”
• “‘The firm is a repeat offender, having been disqualified multiple times for this exact misconduct,’ lawyers for Pagaya and Theorem at law firm Gibson Dunn wrote. Pagaya said Quinn Emanuel had ‘brazenly violated its ethical obligations by turning around and suing its own client.””
• “Quinn Emanuel in a statement on Friday said ‘Pagaya is no longer a client, and our current work is not related to what we did for them before.””
• “In a statement on Friday, a spokesperson for law firm Gibson Dunn said ‘Quinn Emanuel is suing its former client over matters about which it previously advised — a clear conflict of interest that courts have not hesitated to disqualify firms for in the past.””
• “In an April letter from Quinn Emanuel to Edmundson’s attorneys, which was included in the court file, the firm had said the ‘suggestion of a conflict on the part of Quinn Emanuel is false and inaccurate.””
• “The firm also said it had set up ‘appropriate ethical screens out of an abundance of caution’ to separate its prior work for Pagaya with its representation of Edmundson.’”
  Edmundson’s lawsuit accused Pagaya and Theorem of wrongful termination, retaliation and other claims stemming from his firing in April from Theorem, where he was chief investment officer. Edmundson founded Theorem in 2014.’”
• “Edmundson alleged that ‘almost immediately after the merger closed, defendants began systematically dismantling Theorem’s independence and strategic decision-making authority.””
• “Quinn Emanuel provided legal work last year to Pagaya on non-compete and non-solicitation provisions related to Theorem employees, Pagaya said. It further alleged that Quinn Emanuel’s prior work for the company has created a ‘direct and incurable conflict of interest.”

“West Vancouver demolition order halted after appeal court finds judge had conflict” —

• “B.C.’s appeal court has overturned an earlier decision upholding a demolition order for a West Vancouver mansion.”
  “Homeowner Rosa Dona Este was successful in her bid to overturn the earlier court decision, after it was found the judge who allowed the order to go ahead had previously worked for a law firm representing the municipality and had consulted on the matter of Este’s home.”
  “Este had argued against the judge’s decision about the validity of the demolition order but also raised concerns over the judge’s involvement in the case before being appointed to B.C.’s Supreme Court.”
  “‘According to Dr. Este, the judge also erred by failing to recuse herself based on a reasonable apprehension of bias,’ said the appeal court’s decision, handed down earlier this month.”
  “‘Este raised this issue prior to the hearing and advanced an application asking the judge to recuse herself on this basis. The judge dismissed the application, noting that almost seven years had elapsed since she had worked at the firm and stating she could not recall having ever been involved in the file or related matters.’”
  “While Judge Francesca Marzari had said previously that she did not recall working on the case involving Este’s home, a lawyer for the West Vancouver district later filed an affidavit that said Marzari ‘had sent an email to employees of the District advising them on matters related to the possible demolition of Dr. Este’s home.’”
  ‘This information about the judge’s prior involvement in the matter under appeal is clearly relevant to Dr. Este’s allegation of apprehension of bias. For the reasons that follow, I conclude Dr. Este’s applications must be granted,’ wrote appeal court Justice Bruce Butler.”
  “Butler noted that if the appeal were refused, ‘steps could be taken that could lead to irreparable harm to Dr. Este.’”
  “‘The balance of convenience, and particularly the overriding concern for maintaining judicial independence and impartiality, weighs in favour of granting a stay,’ he wrote.”
  “The property in question is a 6,000-sq.-ft. waterfront home at 2668 Bellevue Ave. and was bought in 2003 by Este and her mother, Mina Esteghamat‑Ardakan. Este lived in the home until 2015 when a fire caused extensive damage.”
  “The home remained uninhabited and in a derelict state until 2020 when, following a number of neighbour complaints, the district ordered it demolished.”
  “Complications arose when the district found Este had rebuilt parts of the home without having sought proper permits or permission from her co-owner.”

“OptumRx Moves To DQ Motley Rice In Utah Opioid Case” —

• “Pharmacy benefit manager OptumRx has moved to disqualify Motley Rice LLC from representing the state of Utah in an opioid crisis lawsuit, claiming the firm clearly violated ethical rules by investigating OptumRx on behalf of government entities, then suing OptumRx in a private capacity.”
  “In a motion filed Thursday, OptumRx said Motley Rice’s representation of Utah blatantly violates Rule 1.11(c) of the Utah Rules of Professional Conduct, which prevents attorneys from using ‘confidential government information’ obtained when they were ‘a public officer’ in private lawsuits.”
  “A few years ago, Motley Rice represented Hawaii, Chicago and Washington, D.C., as those governmental entities investigated whether to sue pharmacy benefit managers, or PBMs, like OptumRx for allegedly exacerbating the opioid crisis.”
  “In that capacity, Motley Rice attorneys were deputized as special assistant attorneys general and were acting on behalf of the government with powers not available to private litigants, OptumRx said. In that capacity, Motley Rice sought and obtained troves of confidential information from OptumRx, the motion said.”
  “Now, Motley Rice represents Utah as a private client suing OptumRx over the exact same issue and could very well use that confidential information to its advantage, OptumRx claimed.”
  “‘The rule is designed to protect against abuses of government power and the erosion of public trust,’ OptumRx said. ‘The concerns are so grave that the rules prohibit a former government lawyer from taking on a representation in which they theoretically could use confidential government information to their opponent’s material disadvantage — even if they do not use the information at all.’”
  “Anticipating the common rebuttal that its disqualification motion is nothing but a cynical ploy to disadvantage Utah in the litigation, OptumRx urged U.S. District Judge David Barlow to take its allegations seriously.”
  “‘Simply put, this motion is not a litigation tactic,’ OptumRx said. ‘It is grounded in legitimate and clear-cut ethical concerns.’”
  “To bolster its case, OptumRx pointed to an ethics opinion it commissioned from two legal ethics experts, Sari Montgomery of Robinson Stewart Montgomery & Doppke LLC and Wendy J. Muchman, a professor at Northwestern University Pritzker School of Law. Muchman is on the American Bar Association’s Standing Committee on Ethics and Professional Responsibility.”
  “”There can be no more obvious violation of Rule 1.11(c)’ than Motley Rice’s violation here,’ the motion said, quoting from Muchman and Montgomery’s opinion.”
  “OptumRx has previously attempted to disqualify Motley Rice on the same basis in other cases. Thus far those attempts have all failed.”
  “Motley Rice plays a leadership role in the national multidistrict litigation over the opioid crisis, and OptumRx moved to disqualify the firm in late 2023.”
  “Before OptumRx filed its disqualification motion in the MDL, U.S. District Judge Dan Aaron Polster warned OptumRx’s attorneys that doing so would damage the ‘level of professional cooperation’ among the attorneys in the case and ‘will clearly have negative repercussions for your clients,’ according to a transcript.”
  “Judge Polster ultimately denied the motion in March 2024, finding that while Motley Rice’s previous investigations of OptumRx on behalf of government entities do raise troubling ethical questions, ultimately those concerns are moot because OptumRx is required to turn over the same documents Motley Rice obtained in civil discovery for the MDL anyway.”
  “‘The MDL Repository Orders require OptumRx to produce the investigation documents in the MDL, where all other plaintiffs’ attorneys can use them,’ Judge Polster wrote. ‘It is obvious that Motley Rice’s possession and knowledge of the Investigation documents cannot, by itself, cause a material disadvantage to OptumRx, when every other plaintiff’s attorney also has them.’”
  “OptumRx begged to differ, however.”
  “‘So far, the courts that have ruled on the motions have denied them based on several legal and factual errors, all of which trace back to the MDL court’s ruling,’ OptumRx said. ‘Each of those decisions was wrong.’”
  “On a straightforward letter-of-the-law basis, OptumRx said that whether the information Motley Rice obtained while deputized as a government attorney ultimately ends up available in civil discovery shouldn’t matter.”
  “That information is clearly ‘confidential government information,’ so Motley Rice is clearly prohibited from suing OptumRx from the get-go.”
  “‘If a government lawyer could use confidential government information to the adverse party’s material disadvantage in the civil litigation, then the lawyer must decline the representation,’ OptumRx said. ‘The potential for misuse is so acute and the concerns are so grave that the mere possibility that the attorney could use the information requires disqualification.’”
  “Beyond that, OptumRx said Motley Rice did obtain information in the course of its investigations that still hasn’t been turned over in discovery in the MDL or other lawsuits, including ‘mental roadmaps and strategic insights about OptumRx.’”
  “Neither party responded Friday to requests for comment.”