The growing industry of litigation funding will be expanding further very soon.  Reuters reported last week that well known former federal prosecutor Andrew Stolper of Santa Ana, California, will open a litigation financing firm.  The new company will be based in Irvine, California and will specialize in funding plaintiffs in commercial litigation cases.  Firms like Stolper’s loan money to plaintiffs in exchange for a percentage of any recovery.  The loans typically do not have to be repaid if the plaintiff does not recover.  

Litigation financing is a very controversial practice.  In 2011 the New York City Bar Association issued a formal opinion stating that it is not unethical per se for a lawyer to represent a plaintiff with a non-recourse financing agreement.  However, the same opinion pointed out that there may be a loss of confidentiality due to sharing privileged information with the litigation finance company. The opinion states “a lawyer representing a client who is party, or considering becoming party, to a non-recourse funding arrangement should be aware of the potential ethical issues and should be prepared to address them as they arise.”

In addition to the various ethical concerns, one of the practical ramifications of litigation financing is that it can often complicate the resolution of a case by settlement since the funding company will typically have a lien against the proceeds, minimizing the plaintiff’s net recovery via settlement.  Many mediations fail because of such liens.

Stolper enters his new business with a history of having been strongly criticized by a federal judge in 2009 for engaging in a “shameful” effort to intimidate witnesses.  Further, his partner in the new venture, Peter Norrell, is a former FBI agent who pled guilty in 2010 to illegally accessing FBI records and threatening criminal prosecution to assist a friend in a debt collection matter.  He received two years of probation and three months of home confinement for that incident.  Apparently, Norrell and Stolper have worked together in the past and they bring their experience to the questionable litigation financing industry.   

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Many people will not be shocked by the title of this post.  However, a new report issued by an advocacy group for the U.S. Chamber of Commerce was recently released that was entitled, “The Plaintiffs’ Bar Goes Digital, an Analysis of the Digital Marketing Efforts of Plaintiffs’ Attorneys and Litigation Firms.”  The report found that marketing efforts were being camouflaged as forums or support group sites.   The report estimated that law firms had spent more than $50,000,000 on Google advertising in 2011.  The overwhelming majority of that was spent by Plaintiff’s firms.  However, despite the fact that the amount of spending does not rank with large corporations, it is disproportionate for the size of the industry.  The report is critical of the Plaintiffs’ Bar because of a lack of transparency that many of their sites were actually marketing for law firms.  

As social networking, blogs, and other methods of disseminating information grow, they will become an increasingly prominent part of Plaintiff’s attorneys networking and marketing strategies.  To a lesser extent, we can expect the same on the defense side.  As we expand our internet marketing footprint, we need to be ever vigilant to ensure that our marketing is done truthfully and ethically.  Advertisement by legal professionals should be transparent and truthful.  Various bar associations will most likely weigh in on specific examples in the near future.  We should all make diligent efforts to make sure we are on the right side of whatever precedent is set.  

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On August 4, 2001, the American Bar Association's standing committee on ethics and professional responsibility issued formal opinion 11-461 entitled, "Advising Clients Regarding Direct Contacts with Represented Persons."  As a general rule under ABA model rule 4.2, a lawyer cannot communicate with a person that a lawyer knows is represented by counsel without the opposing counsel's consent to the communication.  This rule extends to the use of an intermediary as an agent to communicate with the represented person.  However, it is also sometimes useful for litigants or parties to a transaction to be able to communicate with each other even though they have their own counsel.  In such instances, the parties maintain the right to communicate directly.  Sometimes these communications may require a lawyer's assistance.

Advising your clients on this point is considered proper.  The primary question addressed in the newly issued opinion is whether a lawyer can advise and assist a client in communicating directly with a represented party without violating Rule 4.2.  The ABA Committee felt that there was tension regarding the lawyer's ability to assist the client and effectuating direct client to client contact. 

The ABA Committee had previously stated in formal opinion 92-362 that a lawyer can ethically advise a client to communicate directly with a represented adversary to determine if the adverse party's lawyer had informed them of a settlement offer.   In the new opinion, the committee states directly that "the decision to communicate directly with a representative person may be the client's idea or the lawyer's.  Some decisions and opinions suggest the counsel may be violating the rules prohibiting communication with a representative party by encouraging or failing to discourage a client speaking directly to the other party."  A concern remained under existing rules that a lawyer might run afoul of Rule 4.2 by "scripting" or "masterminding" a client's communication with a represented person.   The Committee stated that "what constitutes 'scripting' or 'masterminding' the communication is not clear, but such a standard, if too stringently applied, would unduly inhibit permissible and proper advice to the client regarding the content of the communication, greatly restricting the assistance the lawyer may appropriately give to a client."  The Committee concluded that without violating Rules 4.2 or 8.4, a lawyer can give assistance to a client regarding substantive communications with a represented party that could include what subjects are to be addressed regardless of whether the lawyer or the client proposes that the communication take place.  The lawyer may review, redraft and approve a letter or an outline for a conversation that the client wishes to use in the communications with the adversary.  The client may also request that the lawyer draft the basic terms and an agreement that he or she wishes to discuss with an adversary.   Nonetheless, some examples of overreaching do remain. 

The committee references several of them in its opinion stating that they include "assisting the client and securing from the represented person an enforceable obligation, disclosure of confidential information, or admissions against interest without the opportunity to seek the advice of counsel.  To prevent such overreaching, a lawyer must, at a minimum advise her client to encourage the other party to consult with counsel before entering into allegations, making admissions or disclosing confidential information.  If counsel has drafted a proposed agreement for the client to deliver to her represented adversary for execution, counsel should include in such agreement conspicuous language on the signature page that warns the other party to consult with his lawyer before signing the agreement."  

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For the last week or two, the lead story in international media has been the cell phone hacking scandal at the News of the World in London.  As the investigation into those events has widened and details have become publicly known, we have learned that the hacking may have extended to other media outlets and most likely took place outside of the United Kingdom, including in the United States.  Frankly, before this story broke, I never considered that hacking into cell phones by a private person or entity might be possible.  However, now that we know that cell phone privacy may be a real concern, there may be several implications for the legal community.

The first concern we should all have must be our own cell phone security.  It appears that the cell phone hacking allegedly perpetrated by the News of the World was accomplished primarily by hacking into the voicemails of the targets.  The scheme was actually quite simple.  Most people have a four digit code to access their voicemails. According to a recent ABC News report, the most common passcodes are 0000, 1234, 5555, or the last four digits of social security numbers or the birthdates of the user or a close family member.  Obviously, these are not hard to guess.  Furthermore, people tend to use the same passcodes, PINs and passwords for multiple applications, so finding those codes can lead to even more information, accounts, etc. being compromised. 

Since we as lawyers are entrusted with the private and proprietary information of our clients, we have a duty to safeguard that information. We should now all be aware of the risks of cellular privacy and take steps to ensure that our clients' information, as well as our own, remains confidential.  We need to make sure that our voicemails are protected by unique and difficult to decipher PINs and deleted once received. Unfortunately, publicity of events such as the News of the World hacking scheme can lead to many ill-intentioned people learning a new method to steal information or assets.  We can expect this type of act to spread until further security protocols to prevent it are developed.

Another potential implication of the cell hacking scandal is the possibility of attracting the interest of members of the plaintiff's bar interested in pursuing claims related to cellular security.  The victims of the recent cellular hacking most likely will have claims against the perpetrators for invasion of privacy and similar torts.  If the practice of accessing private data of others through cellular phones is more widespread, and it certainly appears from recent news that it is, then we can expect that there will be attorneys out there who will begin marketing the representation of those who have been victims of that practice.  You can expect that the targets will be not only be the hackers,  but also entities or people who may have been in a position to prevent or mitigate the acts.  Our clients will need to be advised accordingly.




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Categories: Identity Theft | Privacy | Technology

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The Wall Street Journal reported last week that a Kentucky judge has recommended that a Cincinnati based plaintiff’s attorney, Stanley Chesley, be disbarred due to conduct pertaining to fee division in a class-action pharmaceutical case. The litigation concerned the diet drug fen-phen, which allegedly caused heart valve damage to many people who took it. After a post-settlement dispute arose over fee division, the presiding judge accused Chesley of "strong-arming" his way into the litigation over the protests of the initial counsel, driving up the fee percentages in order to maximize his personal fee recovery in the case, and defrauding his clients of $7,500,000.  Chesley’s fee was $20,000,000.

This is not the first such fee dispute in the fen-phen litigation. Two other Kentucky lawyers have received prison sentences over misrepresentations about the settlement.  Similar disputes have arisen in many other mass-tort cases throughout the country.  In many, if not most, class action cases, the interests of the plaintiffs are subordinate to the interests of their counsel, who appear to fight not only the defendants, but each other and now, even their clients in order to maximize their personal windfall.  Instances such as this are the inevitable result.

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Categories: Drug and Device Law

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Last year DRI appointed a Social Media Task Force of lawyers to work on DRI’s policy towards social media and its use to enhance and promote the DRI brand. I have the honor of being a member of that group. Our task force’s collective interest is often piqued when we hear of new trends or developments with social media, such as when we learned this week that the Maryland Department of Corrections joined the increasing number of employers requiring employees or job applicants to provide their usernames and passwords in order to access to their personal Facebook accounts.

There is a growing debate in the United States about whether employer-mandated access to personal social media sites is a violation of privacy rights or principles. In the case of the Maryland Department of Corrections, they required a prospective employee to provide Facebook access during an interview. Soon after the interview, they received a letter of protest from the ACLU.

In essence, this practice allows the employer to log in to the applicant’s personal account as if it were the applicant, providing access to not only his or her account, but also to certain information on the pages of the applicant’s friends, most of whom presumably have set up their accounts with privacy settings limiting access to this information. The ACLU compared the Maryland DOC practice as equivalent to requiring the applicant to allow access to personal phone calls as a condition of employment. While searching the internet for public information is likely fair game, the ACLU contends that requiring access to private information is an unwarranted and illegal invasion of privacy. Regardless of the ACLU’s allegations, it is almost certainly a violation of the Facebook user agreement, which requires that a user not allow others to access his or her account.

The Social Media Task Force would like to know what you think. Does the practice engaged in by the Maryland Department of Corrections and other public or private employers violate any state or federal privacy rights? How should we advise our clients if they are considering implementing a similar policy?

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When we were law students or young lawyers we all heard at least one lecture about the virtues of professionalism. They all focused on some variation of the Golden Rule of doing unto others as we would have others do unto us. Some of us even signed pledges to the effect that we would always incorporate those lessons on professionalism in our practice. I suspect most of us feel like we took those lessons to heart but nonetheless, we have all too often encountered other lawyers who have long ago forgotten the professionalism lessons of their legal youth. However, as mature practitioners, we should know better how to respond to bad behavior by our opponents even though it often seems that is not the case. While we all believe that we behave professionally by not initiating inappropriate conflict, it is how we respond to difficult lawyers that is probably the truest test of our own professionalism.

It is easy to behave civilly when met with civil behavior. It is a much greater challenge when we feel that we have been treated unfairly by opposing counsel. However, we should meet that challenge by acting civilly anyway. I believe that we should "turn the other cheek" when we encounter someone who does not deserve it not because we owe it to the obnoxious person who is causing the problem, but because we owe it to the profession as a whole.

Whether intentional or not, people tend to view reactions to bad behavior as disproportionate. When someone hits you, hitting them back even harder rarely has the deterrent effect that one would hope. More likely, another return blow will follow. Such conflicts in the legal profession are rarely physical, but all too often verbal exchanges can get out of hand. These exchanges have become even more common in email, which allows the author to hide behind his or her keyboard and which are frequently read by the recipient as conveying a hostile tone. These kind of exchanges don’t just affect the lawyers involved, but the profession as a whole as uncivilized behavior becomes increasingly accepted as normal.

Perhaps the best way to combat unacceptable behavior and prevent it from becoming acceptable is to strive to respond to ugliness with grace. By doing so, we can all help to lower the overall hostility level of our profession. The next time a lawyer speaks harshly to you, try to respond only to the substance of the issue and ignore the tone, outrageous comments or personal criticism. If it makes you feel better, write that nasty reply email but don’t send it. You may not get the full catharsis of showing the initiating lawyer how clever you are or giving them a piece of your mind, but if enough lawyers will simply ignore the venom of their opponents, eventually nice will become normal again.

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