Contract analysis

I. Introduction and Purpose This memorandum is submitted as a companion to the separately circulated analysis addressing direct adversity and material limitation under Illinois Rule of Professional Conduct 1.7(a)(1) and 1.7(a)(2). That companion memorandum addresses whether the proposed representation of Metropolitan Transit Development Corp. ("MTDC") creates a concurrent conflict with Calderwood & Harkness LLP's exi

II. Factual Background A. Proposed MTDC Engagement (Matter No. 1031-00001) MTDC is a unit of local government and special-purpose transit authority organized under the Illinois Local Mass Transit District Act. Its headquarters are located at 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. MTDC operates bus, commuter rail, and paratransit services throughout Cook County and five surrounding collar count

1. Defense of the Attorney General's CID and any ensuing BIPA or privacy-related enforcement action.

2. Defense of the employee class action now pending in Cook County.

3. Advice concerning remediation of MTDC's biometric-data collection, notice, retention, disclosure, and destruction practices.

4. Evaluation and pursuit of potential cross-claims, indemnification demands, or related proceedings against technology vendors, including Pinnacle.

5. Related employment counseling concerning workforce timekeeping, consent protocols, policy revisions, and vendor management. Preliminary budgeting materials estimate fees in the range of $3.5 million to $5.2 million over an 18- to 24-month period. Proposed timekeeper rates are listed as $1,150 per hour for Rachel Bernstein, $785 per hour for Devon Archer, and $625 per hour for Nadia Petrov. B. Existing Pinnacle Eng

III. Applicable Legal Standard — Illinois Rule of Professional Conduct 1.7(b) A. Text of Rule 1.7(b) Illinois Rule of Professional Conduct 1.7(b) provides: "Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (

IV. Application of Rule 1.7(b) to the Present Conflict A. Prong 1: Reasonable Belief of Competent and Diligent Representation — Fails

1. Irreconcilable Legal Positions Regarding TruScan 360 The first and most serious obstacle is that the firm's two clients would require fundamentally incompatible advocacy concerning the same technology platform. If Calderwood & Harkness represents MTDC, the firm would need to assess and, where strategically useful or necessary, argue that TruScan 360's biometric-data practices were noncompliant with BIPA. That incl

2. The Firm's Possession of Pinnacle Confidential Information The confidential-information problem independently makes competent and diligent dual representation impossible. According to Jonathan Mercer's May 10, 2024 internal email and related intake follow-up, Calderwood & Harkness possesses extensive confidential Pinnacle information about TruScan 360, including source-code architecture summaries, data-flow diagra

3. Substantial Relatedness of the Matters The overlap between the matters is extensive and substantive. Matter No. 1031-00001 for Pinnacle concerns patent licensing and enforcement relating to TruScan 360's biometric-recognition algorithms. Proposed Matter No. 1031-00001 for MTDC concerns defending and remediating claims that the same TruScan 360 platform was used in a manner that violated BIPA and related privacy ob

4. Conclusion on Prong 1 For all of these reasons, prong 1 is not satisfied. No reasonable, disinterested lawyer could conclude that Calderwood & Harkness can provide competent and diligent representation to both MTDC and Pinnacle concurrently. That conclusion alone is sufficient to render the conflict unwaivable under Rule 1.7(b), regardless of whether one could theoretically solicit written waivers. B. Prong 2: Rep

V. Consideration of Alternative Structures A. Could Screening Cure the Conflict? No. As discussed in the separate memorandum concerning Illinois Rule 1.10 and imputation, screening is not an available cure for a current-client conflict of this nature. This is not a case involving a lawyer's migration from another firm, where screening may under limited circumstances prevent imputation of a former-client conflict. The

VI. Financial Considerations — Not a Factor in the Ethical Analysis The intake materials reflect that the proposed MTDC engagement would likely be significant from a revenue perspective, with estimated fees of approximately $3.5 million to $5.2 million over 18 to 24 months. By comparison, Pinnacle generated $2,137,500 in actual firm billings during fiscal year 2023. MTDC also reportedly maintains an annual outside-co

VII. Conclusion and Recommendation The conflict between the proposed MTDC engagement (Matter No. 1031-00001) and the existing Pinnacle engagement (Matter No. 1031-00001) is unwaivable under Illinois Rule of Professional Conduct 1.7(b). Prong 1 fails. No reasonable lawyer could conclude that Calderwood & Harkness can provide competent and diligent representation to both MTDC and Pinnacle at the same time, given: (i) t

VIII. Appendices / Attachments Appendix A: Full Text of Illinois Rule of Professional Conduct 1.7 Illinois Rule of Professional Conduct 1.7 — Conflict of Interest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be direc

1. Conflicts Search Report — Round 1, dated May 10, 2024.

2. Conflicts Search Report — Round 2, dated May 13, 2024.

3. Internal Email from Jonathan Mercer to Rachel Bernstein and Conflicts Team, dated May 10, 2024, confirming the nature of confidential Pinnacle technical information in firm files.

4. Confidential Information Inventory, prepared by Priya Subramaniam, identifying categories of Pinnacle materials relating to TruScan 360 architecture, data flows, retention policies, and algorithm design.

5. Companion Memorandum re Illinois Rule 1.7(a), addressing direct adversity and material limitation.

6. Memorandum re Illinois Rule 1.9, addressing former-client conflicts in the event withdrawal from Pinnacle were considered.

7. Memorandum re Illinois Rule 1.10, addressing imputation and why screening would not cure the present conflict.

8. MTDC Intake Notes, including summary of May 6, 2024 call with Rachel Bernstein and preliminary engagement scope.

9. Preliminary Exposure Assessment from Lakefront Actuarial Advisors, LLC, regarding estimated BIPA statutory damages.

10. Master Software License and Services Agreement between MTDC and Pinnacle, dated June 15, 2021.

11. Attorney General Civil Investigative Demand, CID Ref. No. CRB-2024-0417.

12. Cook County Class Action Complaint, Case No. 2024-CH-04417. End of Memorandum Entity | Role / Position | Relationship to TruScan 360 | Relationship to Calderwood & Harkness | Conflict Significance Metropolitan Transit Development Corp. ("MTDC") | Proposed client | End-user/customer deploying TruScan 360 under 6/15/2021 MSLA | Proposed new representation, Matter No. 1031-00001 | Would require defense of BIPA claim