RESTRICTED DO NOT DISTRIBUTE OR MAKE COPIES Carlsmith Ball 2012 Risk Management Beth Whitney, September 2012, SwissRe/Westport Corporate Solutions RESTRICTED.

RESTRICTEDDO NOT DISTRIBUTE OR MAKE COPIES

Carlsmith Ball 2012 Risk ManagementBeth Whitney, September 2012, SwissRe/Westport

Corporate Solutions



Beth Whitney | Carlsmith Ball Sept 2012 | SwissRe/Westport

Corporate Solutions

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Table of Contents / Agenda

Social networking and other cyber issues for lawyers Conflicts of interest and the risks of sitting on a board Changes to US Patent law: America Invents Act



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Social networking

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As of June 2012 955 million active Facebook users - Friends

Personal page

– adjust privacy settings to approve friends

– anyone can write on your wall

Business pages

– indexed by Google

– anyone can see

– can allow others to write on your wall (or not!)

Groups – topic of interest

– entice people to visit your business page

– enter valuable posts for the group

– can allow interaction

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Facebook basics



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500+ million users - Followers

Microblogging, 140 character messages = tweets

Tweets are posted on your profile page and viewed by your followers

Privacy settings allow you to create subgroups (ie friends, clients, colleagues) that can only see certain tweets

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Twitter basics



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175 million users - Connections

Business oriented social networking website

Average age of user is 44.3

Job posters/searchers

Research companies

LinkedIn Answers allows users to ask questions for the community to answer

Join groups of like interests – professional, alumni, etc.

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LinkedIn basics



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Network - Build and maintain relationships with clients, potential clients and other attorneys

Attract new clients, no cost

Establish a professional persona, develop reputation as expert

Research law, find experts, gather information

Keep up to date on topics of interest

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Benefits for attorneys



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Don't install applications "apps" (games, etc.) as they are a security weakness

– can carry viruses

– ask for your username and password

Password hacking – Use a strong pass word and change it on a regular basis.

– 8 or more characters

– combination numbers, letters and symbols

– I want to marry George Clooney! (Iw2mGC!)

Emails with malicious links from friends whose accounts have been hacked

Beware spam emails claiming that there has been a violation of the terms of agreement or some other type of issue which needs to be resolved

Be careful clicking any link or video someone puts on their FB "wall" or tweet

Time vacuum

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Social media general risks



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Warn clients that their pages are discoverable

– include warning in engagement letter

Be careful who you friend - Friends can post messages, links and pictures to your page, that could violate the professional rules of ethics

Don't friend a judge – could be considered ex parte communcations

Unauthorized practice of law

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Social media risks and ethical concerns

Rule 5.5. Unauthorized Practice of Law A lawyer shall not: (a) practice law in a jurisdiction where doing so violates the regulation of the legal profession in that jurisdiction, or (b) assist a person who is not a member of the bar…



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Be careful criticizing the court!

Privacy – public disclosure of private facts

Incorrect advice

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Rule 8.2 Statements Concerning Judges and Other Adjudicatory Officers (a) A lawyer shall not make a statement that the lawyer knows to be false or with reckless disregard as to its truth or falsity concerning the qualifications or integrity of a judge.



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Breaches of client confidentiality - A lawyer should not blog, tweet, or post information that can be connected to a client without that client's consent.

Defamation/Libel – context – commercial speech?

Advice v. information, atty client relationship formed?

Don't friend opposing counsel – could use information gained against your client

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Rule 1.6 Confidentiality of Information(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, …



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Advertising/solicitation

ABA Commission on Ethics 20/20 comment: prohibition against a solicitation through a real-time electronic exchange initiated by the lawyer

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Social media risks and ethical concerns for lawyers 4/6

Rule 7.3 Direct Contact with Prospective Clients (a) A lawyer shall not by in-person or live telephone contact solicit professional employment from a prospective client with whom the lawyer has no family or prior professional relationship when a significant motive for the lawyer’s doing so is the lawyer’s pecuniary gain.

(b) A lawyer shall not solicit professional employment from a prospective client by written or recorded communication or by in-person or telephone contact even when not otherwise prohibited by (a), if:

(1) the prospective client has made know to the lawyer a desire not to be solicited by the lawyer; or

(2) the solicitation involves coercion, duress or harrassment.



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Never lie to gain access to information, witness, etc.

PA attorney was disciplined for having a 3rd party friend an unrepresented witness on Facebook and MySpace on the lawyer's behalf

Never contact a victim or person represented by counsel or witness without full disclosure of your professional affiliation

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Rule 7.1 Communications Concerning a Lawyer's Service A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.Rule 4.1 Truthfulness in Statements to Others In the course of representing a client a lawyer shall not knowingly: (a) make a false statement of material fact or law to a third person; …



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Your firm website, email, and blogging

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Be clear that an attorney client relationship is not intended

– Disclaimer: Contacting the firm or reading the materials on this site does not create an attorney-client relationship

Unauthorized practice of law (see HI PRC 5.5)

– Disclaimer: This site is for informational purposes only and is not intended to be considered the rendering of legal advice.

– State where your attorneys are licensed to practice law

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E&O Risks

Carlsmith Ball LLP provides the following materials for general information only and not as legal advice. Your receipt of the materials we have provided is not intended to create an attorney-client relationship. We do not undertake to update the materials to reflect subsequent legal or other developments. You should not rely or act on this information without obtaining the advice of a qualified attorney. Please do not send us any confidential information until you obtain authorization from one of our attorneys.



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Advertising

– Some of the content on this web site may constitute attorney advertising with in the meaning of applicable bar rules. As applicable, the following statement is made in accordance with those rules: ADVERTISING MATERIAL. PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME.

Email

– Warn potential clients not to send confidential information over the internet or through email and that sending an email to the firm does not create an attorney-client relationship

– Consider requiring acceptance of the disclaimer before the user can send any email through the internet

Clients/representations – Be sure to get approval to list current and prior clients, testimonials, results, etc….

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E&O Risks



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Maintain copies of all website text, including disclaimers, noting the dates that the text appeared on the site.

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E&O risks

Rule 7.2 Advertising (b) A copy or recording of an advertisement or written communication shall be kept for two years after its last dissemination along with a record of when and where it was used. (d) Any communication made pursuant to this rule shall include the name of at least one lawyer responsible for its content.



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Your firm policy

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Undesirable/unrealistic to ban all social media

– ability to block internet access

– allow limited access to select sites

– non-compliance

– home usage

Better served to set boundaries and educate about the risks

Open dialogue find out what people are doing

Jay Shepherd's twitter policy:

– Be professional, kind, discreet, authentic. Represent us well. Remember that you can’t control it once you hit “update.”

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Firm policy purpose



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In writing and should apply and be acknowledged by all attorneys and staff

Introduction stating the firm's objectives and guiding principles for social media usage and concern of the risks

– business development

– personal relationships

– preserve client confidentiality

– protect the firm's reputation

Scope covers all firm related online and internet activities

– posts that contain the firm's name, address, contact information, firm's email suffix, link to firm's website, images related to the firm

– posts created or maintained at Firm or using Firm computers or other equipment

– personal usage

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Elements of online policy 1/3



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Risks

– Think before you friend anyone

– Respect copyright law

– Be cautious giving legal advice

– Honest communications and the risks of misrepresentations

– always disclose your identity as a lawyer and firm affiliation as well as your professional or personal interest.

– don't misrepresent your experience or achievements.

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Ethical issues

– Protect client and firm confidences

– Advertising and solicitation rules apply

Firm processes and procedures

– Authorization process for certain activities – blogs, etc.

– Run conflicts checks before discussing any specific legal matter

– disclaimer requirements

– Instruct employees to "friend"/link to any website where the Firm itself has a presence so firm can see what employees are posting

– Warn that firm may monitor computer use – no expectation of privacy

– List of prohibited sites or permissible sites

– Advise employees the consequences of engaging in illegal, unethical behaviour and/or not following the Firm's policy.

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Corporate Solutions

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Current IBM social computing guidelines

Never discuss Corporate business performance Don’t cite or reference clients, partners or suppliers without their approvalDon’t publish anything that might allow inferences to be drawn which could embarrass or damage a clientRespect your audienceDon’t pick fights and be the first to correct your own mistakesTry to add valueDon’t use Company logos or trademarks unless approved to do so

Know and follow Business Conduct GuidelinesEmployees are personally responsible for the content they publish on-lineBe mindful that what you publish will be public for a long timeIdentify yourself – name and, when relevant, role at the CompanyYou must make it clear you are speaking for yourself and not the CompanyRespect copyright, fair use and financial disclosure lawsDon’t provide the Company’s or another’s confidential or proprietary information



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Scams: Beware

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Trust Accounts Red Flags

– request comes from a person using an email address through gmail, yahoo, hotmail etc. NOT associated with a company

– request comes from a person you have never met

– request that you negotiate a certified check

– request that you wire transfer the money immediately to another person (many times in another country)

– its too good to be true, you get a large amount of money for simply putting a check into your account and then cutting another check

*NB Just because the funds are available to you doesn't mean the check is good! Counterfeit checks of any kind may take weeks to discover and untangle.

*Protect yourself by using wire transfers and only taking checks from people you know and trust!

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Spear phishing – social engineered attacks



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Report suspicious activity

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Conflicts of Interest

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Polled senior claims examiners of 6 LPL insurance companies

4 of the 6 said frequency is up from 6-20% in 2011

– due to recession and real estate slump

4 of the 6 said Real Estate as AOP with the most claims - # of transactions and decrease in property values

– Corporate and Securities work ranked 2nd in claims activity

– Trusts and Estates work ranked 3rd in claims activity

– Business Transactions/Commercial law ranked 4th

5 of the 6 said they saw an uptick in the number of claims with reserves over $500k, 6-20%

5 of the 6 were involved in paying a claim of $50M or more

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Ames and Gough Study



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5 of the 6 said "conflicts of interest" was the first or second largest cause of malpractice claims.

– comment: All attorneys have an affirmative duty to identify and address conflicts. This issue is best addressed on the front end by carefully screening the new clients, seeking advance waivers (where appropriate) and clarifying who the client is for any given matter.

3 cited "failure to timely file" as first or second largest cause of claims.

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Ames and Gough Study



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Two main type of conflict claims

Conflicts between clients– New client adverse to existing client

– New client adverse to former client

– Multiple client representation in the same matter

– Positional conflicts

Conflicts between attorney and clients– Business conflicts with existing clients

– Business transactions with clients and investments in client business

– Personal interest conflicting with those of clients



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HI RPC Conflict of interest sections

Rule 1.7 Conflict of Interest: General Rule

Rule 1.8 Conflict of Interest: Prohibited Transactions

Rule 1.9 Conflict of Interest: Former Client

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Corporate Solutions

Related RPC conflict of interest sections

Related

– 1.6 Confidentiality of Information

– 5.3 Responsibilities Regarding Non-lawyer Assistants

– 1.10 Imputed Disqualification: General Rule

– 1.11 Successive Government and Private Employment

– 1.13 Organization as a client

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Corporate Solutions

Consequences of conflicts of interest

Malpractice suit

Disciplinary complaint

Disqualification

Disgorgement of fees – coverage – BK trustees

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Corporate Solutions

Potential situations that may lead to conflict claims

During the intake process

When attorneys move between firms

Representing multiple parties

Board of directors

Party added to suit

Failing to terminate representation in writing

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Corporate Solutions

Rules of thumbGenerally,

A lawyer should never represent one client who is directly adverse to an existing client – even if the matters have nothing to do with each other – the risk of divided loyalties (or the perception) is too great

A lawyer should never represent one client who is adverse to a former client if the representation is substantially related to the former representation

Conflicts can arise at any time

Many conflicts are waivable with consent after "consultation"

Definition: "Consult" or "consultation" denotes communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question.

Perception is everything

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Corporate Solutions

Who is your client?

Corporation – Board of directors, Shareholders, Officers

– NOT the prez – this is generally the agent of the corporation, client contact

Partnership – Partners

– NOT the Managing partner or General partner, client contact

Trust – Trust

– NOT the trustee, client contact

– NOT the beneficiaries

Engagement letter should clearly identify who the client is.

– lawyeringlaw.com (user name = westport; password = insure)

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Corporate SolutionsHI RPC 1.7 Conflict of interest: General Rule

(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:

(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and

(2) each client consents after consultation.

(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person or by a personal interest of the lawyer, unless:

(1) the lawyer reasonably believes the representation will not be adversely affected; and

(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include and explanation of the implications of the common representation and the advantages and risks involved. 38



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Consultation best practices

Definition: "Consult" or "consultation" denotes communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question.

– document consent contemporaneously (bill) and put it in writing

– multiple client representation MUST warn of implications of the common representation including possible effects of loyalty, confidentiality and the attorney-client privilege and the advantages and risks involved

– advise your client to get independent legal counsel – in writing!

– advise your client that you may have to withdraw and the consequences (lost time, money, etc)

– Remember that a client may revoke their consent at any time

– in multi representation warn about this too

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HI RPC 1.9 Conflict of Interest: Former Clients

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation.

(b) A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client

(1) whose interests are materially adverse to that person; and

(2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c ) that is material to the matter; unless the former client consents after consultation.

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RPC 1.9 Duties to former clients, cont.

(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter,

(1) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client, or when the information has become generally known; or

(2) reveal information relating to the representation except as the Rule 1.6 or Rule 3.3 would permit or require with respect to a client.

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Representing opponents of former clients Same or substantially similar matters. Duty of loyalty continues even

after termination of attorney-client relationship, but it is limited

– key terms "materially adverse" and "substantially related

Rule 1.9(a) Classic examples:

– Divorce: Wife consults attorney but does not proceed with the divorce. Later the couple decides to divorce and the Husband hires the attorney.

– Auto accident: Attorney represents both the driver and passenger. During representation attorney realizes passenger has a claim against the driver. Attorney withdraws from representing driver (now a former client).

– Attorney formerly represented a client in securing environmental permits to build a shopping center could not later represent neighbors seeking to oppose rezoning of the property based on environmental considerations. BUT could represent a tenant of the complete shopping center in an eviction proceeding.

Purpose of Rule 1.9 is to protect the former client's confidential information from being disclosed or used against him

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Board service: real world situation

An attorney who does work for an entity is asked to sit on the board.

The attorney is flattered and of course this makes sense since she knows so much about the entity, business and its players already.

The attorney is uncomfortable saying “no” to the request. She wants to please her client.

Shareholders file suit against the board for breach of fiduciary duty in addition a separate count is brought against the attorney for legal malpractice.

The lawyer who serves as a director and continues to act as lawyer for the corporate client has become both client and lawyer.

Can the lawyer truly remain objective?



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Board service considerations Time commitment

May encounter disagreements

Stronger corporate governance laws (SOX)

Loss of attorney client privilege if wearing both hats

Firm disqualification if suit is brought – witness

Recusal from certain board decisions if it will impact firm

Need to disclose these risks to the entity, in writing

Increased risk of malpractice claims

Weakened defenses – juries don’t understand causation

Coverage – no coverage under legal mal policy

Increased underwriting scrutiny premium?



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If you are going to do it…

Firm should have a formal process in place to review and approve/reject.

– For profit, Not for profit?

– Publicly traded or private, closely held?

– Regulated industry?

– Does the entity have D&O insurance, what are the limits, look at policy excl., employed lawyer policy?

– how many people sit on the board, who? other attorneys?

– how will attorney delineate when atty v. board member?

– will lawyer on the board be same one providing legal services at firm?

– Review at least annually



Corporate Solutions

Best practice is to wear 1 hat. Decide if you want to serve as a director or if the firm wants to continue providing legal services – not both.

– if you will be serving only as director, send a letter state that you will not be acting as an attorney or representative of your firm

Do NOT have any financial interest in the client organization

– more coverage issues, consider spouses

Provide written disclosure of loss of attorney-client privilege, loss of malpractice coverage, recusal, disqualification, informed consent, etc.

– freivogel.com waiver/consent forms

Make sure ALL your actions are fair, reasonable and fully explained in writing

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If you are going to do it (cont.)…



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Top risk management tips re: conflicts of interest

Remember the rules of thumb:

– A lawyer should never represent one client who is directly adverse to an existing client – even if the matters have nothing to do with each other – the risk of divided loyalties (or the perception) is too great

– A lawyer should never represent one client who is adverse to a former client if the representation is substantially related to the former representation

– Conflicts can arise at any time

– Many conflicts are waivable with "informed consent"

– Perception is everything

Make sure your consultation is adequate

Make sure your consultation is documented IN WRITING – even if the Rules don't require it!

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Corporate Solutions

Top risk management tips re: conflicts of interest, cont. Have a WRITTEN policy that no client or matter will be accepted

by the firm without a thorough check for conflicts of interest.

– Reminder that confidential information should not be sought until conflict check complete

– Should have a designated partner or committee

– Immediate consultation of the committee should be sought if potential conflict arises during representation (parties added, etc.)

– Client data base (name of client, parent, subsidiary and affiliated entities, officers and directors, adverse party, adverse party parent, subsidiary and affiliated entities, adverse counsel, other parties)

– Human touch – circulate memo with similar information plus general nature of representation.

– Address investments with clients – don't do it

– Address outside interests (Board service, trustee, officers)

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Corporate Solutions

Top risk management tips re: conflicts of interest, cont.

Utilize engagement letters

– outline who the client is, and is not

– define the scope of representation

Closing letters

– clearly turn current clients to former clients

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Corporate Solutions

Changes to US Patent law: America Invents Act

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Corporate Solutions

Signed into law the Leahy Smith America Invents Act on September 16, 2011

Some changes are effective immediately. Some are effective March 16, 2013. Some retroactive.

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America Invents Act



Corporate Solutions

No longer "first to invent" system. Now "first to file".

Benefits: simplifies administrative proceedings, reduces litigation complexity, brings new inventions to market faster

Under the AIA, prior art now includes any public disclosure of an invention (including any patent, published patent application, sale, advertisement and trade/scientific journal publication, in any country and in any language) made prior to an applicant's effective patent application filing date in the United States. There are exceptions.

One being if a disclosure was made 1 year or less before the effective filing date by the inventor/joint inventor/…

If the original inventor can prove that another earlier filing inventor derived the invention from the original inventor

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Biggest Change: First to File



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Prioritized examination for $2,400/$4,800

rapidly evolving industries or those seeking a deterrent to imminent or actual infringement by competitors.

10,000/year limit. 1Q 2012 = 1773. Allow rates > 90% since inception.

AIA added "virtual marking" so patent owners can update products without having to re-label or reproduce

Micro-entity status – income no more than3x national average or assign the invention to an institution of higher education

False marking – now only the United States may bring an action for statutory fine. Private litigants must show competitive injury. Applies retroactively.

Expansion of time period to submit prior art against pending patent applications. But must now include explanation of relevance.

A third party can request post-grant review of a patent for 9 months after issuance.

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More changes to patent law



Corporate Solutions

Don't dawdle

Be responsive to your attorneys requests

Don't disclose (sell, publish, etc.) too soon

Consider prioritized examination

Determine if you are a "micro-entity"

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Corporate Risk Management Tips: AIA


Thank you

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Legal notice

©2012 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivatives of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re.

Although all the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial and/or consequential loss relating to this presentation.

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RESTRICTED DO NOT DISTRIBUTE OR MAKE COPIES Carlsmith Ball 2012 Risk Management Beth Whitney, September 2012, SwissRe/Westport Corporate Solutions RESTRICTED.

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