Contract analysis

I. PURPOSE OF THIS MEMORANDUM This memorandum summarizes the outcome of the conflicts-clearance process for proposed Matter No. 1031-00001 and formally communicates the firm's decision to decline the proposed engagement with Metropolitan Transit Development Corp. ("MTDC" or "Metro Transit"). After a thorough and carefully documented review, the firm has determined that it cannot undertake the proposed MTDC representa

II. BACKGROUND — THE PROPOSED MTDC ENGAGEMENT A. The Prospective Client Metropolitan Transit Development Corp. ("MTDC" or "Metro Transit") is a unit of local government and special-purpose transit authority established under the Illinois Local Mass Transit District Act, 70 ILCS 3610/1 et seq. MTDC is headquartered at 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. It operates an extensive multimodal pu

1. Illinois Attorney General Civil Investigative Demand On April 22, 2024, the Illinois Attorney General's Bureau of Civil Rights, acting through Deputy Attorney General for Civil Rights Malcolm Jeffries, issued a Civil Investigative Demand ("CID") to MTDC (Reference No. CRB-2024-0417). The CID alleges violations of two Illinois privacy statutes: (i) the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 1

2. Employee Class Action On April 29, 2024 — one week after the issuance of the AG's CID — a putative class of approximately 12,400 current and former MTDC employees filed suit against MTDC in the Circuit Court of Cook County, Chancery Division. The case is captioned Rodriguez et al. v. Metropolitan Transit Development Corp., Case No. 2024-CH-04417. The complaint alleges violations of BIPA and related state-law priva

3. The Biometric Platform at Issue The claims in both the AG CID proceeding and the employee class action center on the same technology platform: TruScan 360, an AI-powered timekeeping and scheduling platform using fingerprint recognition, facial-geometry analysis, and iris-scan data for employee identification, time-and-attendance tracking, and workforce scheduling. TruScan 360 is the flagship product of Pinnacle Wo

III. THE CONFLICT — EXISTING REPRESENTATION OF PINNACLE WORKFORCE ANALYTICS, INC. A. Identification of the Conflict Upon the opening of the new-matter intake on May 9, 2024, the firm's Conflicts & New Business Department, under the direction of Colleen Farrow, Director, Conflicts & New Business, initiated a standard conflicts search (Round 1) against all parties identified in the intake questionnaire, including MTDC,

1. Direct Adversity — Illinois Rule 1.7(a)(1) Under Illinois Rule of Professional Conduct 1.7(a)(1), a conflict of interest exists if "the representation of one client will be directly adverse to another client." The proposed MTDC engagement would place Calderwood & Harkness in a position of direct adversity to Pinnacle in at least two critical respects. First, Pinnacle is identified as a "responsible party" in the A

2. Material Limitation — Illinois Rule 1.7(a)(2) Under Illinois Rule of Professional Conduct 1.7(a)(2), a conflict of interest exists if "there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client." Even if the proposed MTDC engagement could somehow be restructured to avoid the assertion of cross-claims against Pinnacle — wh

3. Confidential Information The material-limitation problem is further compounded by the firm's possession of extensive Pinnacle confidential information bearing directly on TruScan 360. In an email to the undersigned dated May 10, 2024, Jonathan Mercer confirmed that in the course of the patent-enforcement matter (Matter No. 1031-00001), the firm has received and retains the following categories of Pinnacle confiden

IV. CONFLICTS COMMITTEE DETERMINATION Upon identification of the conflict through the Round 1 conflicts search and completion of the preliminary analysis described in Section III above, Rachel Bernstein formally escalated the matter to the firm's Conflicts Committee, chaired by Senior Partner Lawrence Keating, on May 13, 2024. The escalation was accompanied by a draft analysis memorandum prepared by Helen Drazkowski,

V. FINANCIAL IMPACT — FOREGONE REVENUE The declination of the proposed MTDC engagement results in the loss of a significant revenue opportunity for the firm. The estimated foregone fees from the MTDC engagement are in the range of $3.5 million to $5.2 million over 18 to 24 months, based on the preliminary fee estimate prepared during the intake process. This estimate encompasses the defense of the AG CID, the employe

VI. PLAN FOR COMMUNICATING THE DECLINATION TO MTDC A. Declination Letter Rachel Bernstein will prepare a formal declination letter addressed to Terrence Whitfield, General Counsel, Metropolitan Transit Development Corp., 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. The letter will be reviewed and approved by Helen Drazkowski, General Counsel, before it is transmitted. The review by Ms. Drazkowski is

1. Aldridge, Paulson & Cho LLP • Address: 150 North Michigan Avenue, Suite 3500, Chicago, Illinois 60601 • Contact Partner: Victoria Aldridge, BIPA Practice Lead • Firm profile: Aldridge, Paulson & Cho maintains one of the largest and most experienced BIPA defense practices in Illinois. Victoria Aldridge has defended multiple BIPA class actions on behalf of public-sector and private-sector clients, including several

2. Northfield McKay LLP • Address: 311 South Wacker Drive, Suite 4800, Chicago, Illinois 60606 • Contact Partner: Damien Northfield, Data-Privacy Litigation Lead • Firm profile: Northfield McKay is a mid-size litigation boutique with a dedicated data-privacy litigation group. Damien Northfield has particular experience with Attorney General investigations and enforcement actions under BIPA and related Illinois privac

VII. RETURN OF MATERIALS During the intake and conflicts-clearance process, the firm confirmed that no substantive client documents or confidential information were received from MTDC. The initial intake was based on publicly available information (the filed class-action complaint, the AG's CID reference number as provided by Mr. Whitfield during the intake call, and general background information about MTDC's operat

VIII. DIRECTIVES TO THE ENGAGEMENT TEAM The following directives are effective immediately upon distribution of this memorandum and apply to all members of the proposed MTDC engagement team. A. Cessation of Work All members of the proposed MTDC engagement team — specifically Miriam Calloway, Devon Archer, and Nadia Petrov — are directed to immediately cease any and all work related to Matter No. 1031-00001. This dire

IX. MATTER CLOSURE — NEXT STEPS AND TIMELINE The following table sets forth the specific action items, responsible persons, and target dates for the orderly closure of Matter No. 1031-00001: All action items are to be completed by the dates indicated above. Rachel Bernstein and Colleen Farrow will coordinate to ensure that the closure process is executed in an orderly and timely manner. Any delays or complications sh

X. CONCLUSION The declination of the proposed Metropolitan Transit Development Corp. engagement is regrettable but ethically compelled. The firm cannot undertake a representation that would place it in direct conflict with a current client on a substantially related matter involving the identical technology platform — Pinnacle's TruScan 360 — at the center of both the existing and proposed engagements. The firm's obl