1031-00001 · Kessler, Brandt & O'Neill LLP · documents

conflicts-committee-analysis-memo-draft.docx DOCUMENT Labor & Employment

2 / 35 ← → ✕

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT PRIVILEGE

FOR CONFLICTS COMMITTEE USE ONLY

This memorandum was prepared by the Office of the General Counsel of Calderwood & Harkness LLP in anticipation of the Conflicts Committee meeting of May 14, 2024. It is protected by the attorney-client privilege, the work-product doctrine, and the firm's internal deliberative-process protections. Distribution beyond the named recipients is strictly prohibited without the prior written consent of the General Counsel. Any unauthorized review, use, disclosure, or distribution is prohibited.

From: Helen Drazkowski, General Counsel, Calderwood & Harkness LLP

To: Lawrence Keating, Senior Partner & Chair, Conflicts Committee

Cc: Colleen Farrow, Director, Conflicts & New Business Rachel Bernstein, Partner, Privacy & Data Security Jonathan Mercer, Partner, intellectual Property / Patent Litigation

Date: May 13, 2024

Re: DRAFT — Conflicts Analysis: Proposed Representation of Metropolitan Transit Development Corp. (Proposed Matter No. 1031-00001) — Conflict with Existing Client Pinnacle Workforce Analytics, Inc. (Matter No. 1031-00001)

I. Executive Summary

Calderwood & Harkness LLP ("the Firm" or "C&H") has been approached by Metropolitan Transit Development Corp. ("MTDC"), a governmental transit authority organized under the Illinois Local Mass Transit District Act, 70 ILCS 3610/1 et seq., and headquartered at 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. MTDC seeks to retain the Firm as outside counsel in connection with a data-privacy enforcement action initiated by the Illinois Attorney General and related employment class-action litigation pending in the Circuit Court of Cook County. The proposed engagement has been assigned Proposed Matter No. 1031-00001 for internal tracking purposes.

The Firm's standard conflicts-clearance process, initiated on May 9, 2024, upon receipt of a completed New-Matter Intake Request Form (C&H Form NM-1) from Rachel Bernstein, Partner, Privacy & Data Security, identified that the Firm currently represents Pinnacle Workforce Analytics, Inc. ("Pinnacle"), a Delaware corporation headquartered in Reston, Virginia, in active patent-licensing and enforcement matters under Matter No. 1031-00001. The Pinnacle engagement is led by Jonathan Mercer, Partner, intellectual Property / Patent Litigation, and involves the same biometric workforce-management platform — Pinnacle's flagship product, "TruScan 360" — that is at the center of the proposed MTDC engagement.

The intersection between these matters is not tangential. Pinnacle is MTDC's former workforce-surveillance technology vendor and is specifically named as a "responsible party" in the Illinois Attorney General's Civil Investigative Demand (CID Ref. CRB-2024-0417) served upon MTDC. The Attorney General has indicated publicly and in correspondence with MTDC that it may name Pinnacle as a co-respondent in anticipated enforcement proceedings. MTDC's contemplated litigation strategy, as described by MTDC's General Counsel during preliminary discussions with Rachel Bernstein, expressly includes cross-claims and indemnification demands against Pinnacle under the parties' Master Software License and Services Agreement ("MSLA") dated June 15, 2021.

Based on the analysis set forth in detail below, the General Counsel's preliminary recommendation is that the conflict between the proposed MTDC engagement and the existing Pinnacle engagement is likely unwaivable under Illinois Rules of Professional Conduct 1.7(a)(1) (direct adversity) and 1.7(a)(2) (material limitation). The conflict fails the waivability test under Rule 1.7(b) on multiple independent grounds, and consent from both affected clients would not cure the conflict. Screening under Rule 1.10 is unavailable because the conflict arises from a concurrent representation by a current Firm partner rather than from a lateral hire. Accordingly, the Firm should decline the proposed MTDC engagement.

This draft memorandum is submitted for the Conflicts Committee's review and deliberation at its meeting scheduled for May 14, 2024, at 10:00 a.m. Central Time in Conference Room 42-A of the Firm's Chicago office. All members of the Conflicts Committee are requested to review this memorandum and the attached supporting documents in advance of the meeting.

II. Procedural History of the Intake

The following chronology sets forth the procedural history of the MTDC intake request and the identification and escalation of the conflict:

May 6, 2024: MTDC General Counsel Terrence Whitfield contacted Rachel Bernstein, Partner, Privacy & Data Security, in the Firm's Chicago office, by telephone. The contact was made following a referral from Constance Hargrove, lead partner at Hargrove, Tillman & Reese LLP, located at 233 South Wacker Drive, Suite 5600, Chicago, Illinois 60606. Hargrove, Tillman & Reese serves as MTDC's existing outside litigation counsel for general tort defense, insurance coverage, and construction disputes. According to both Mr. Whitfield and Ms. Hargrove, the referring firm specifically directed MTDC to Calderwood & Harkness because of the Firm's nationally recognized expertise in biometric data-privacy law and class-action defense — expertise that Hargrove, Tillman & Reese candidly acknowledged it lacked in-house. During the initial telephone call, Mr. Whitfield described the general nature of the matters at issue, including the Attorney General's CID and the Cook County employee class action. Rachel Bernstein did not enter into any engagement, make any substantive legal recommendations, or receive any confidential information beyond the publicly available case filings during this initial call. She informed Mr. Whitfield that the Firm would need to conduct its standard conflicts-clearance process before any engagement could be formalized.

May 9, 2024: Rachel Bernstein completed and submitted a New-Matter Intake Request Form (C&H Form NM-1) for Proposed Matter No. 1031-00001. The form identified MTDC as the prospective client and described the proposed engagement scope as defense of the AG CID, defense of the employee class action, biometric data-practice remediation advice, potential cross-claims against technology vendors (including Pinnacle), and related employment counseling. Bernstein simultaneously submitted a Conflicts Search Request Memorandum to Colleen Farrow, Director of Conflicts & New Business, requesting a comprehensive Round 1 search across all Firm databases, including the client-matter database, the conflicts-clearance system, the new-business pipeline database, historical billing records, and the lateral-hire disclosure database. The Round 1 search was initiated the same day.

May 9, 2024 (same day): The Round 1 conflicts search was run by the Conflicts & New Business team across all Firm databases. The search covered the following search terms and entities: "Metropolitan Transit Development Corp.," "MTDC," "Terrence Whitfield," "Lucia Marchetti," "Darnell Okafor," "TruScan 360," "Pinnacle Workforce Analytics," "biometric workforce management," "BIPA," "Cook County Case No. 2024-CH-04417," and related terms. The search also cross-referenced all named parties identified in the publicly available Cook County complaint and the AG's CID cover letter.

May 10, 2024: The Conflicts Search Report (Round 1) was issued by Colleen Farrow's team and distributed to Rachel Bernstein, Helen Drazkowski, and Lawrence Keating. The Round 1 report identified a direct match: Pinnacle Workforce Analytics, Inc. is an existing client of the Firm, currently represented under Matter No. 1031-00001 by Jonathan Mercer, Partner, intellectual Property / Patent Litigation. The report flagged both direct-adversity concerns (Rule 1.7(a)(1)) and material-limitation concerns (Rule 1.7(a)(2)). The report also noted that Pinnacle's TruScan 360 platform — the product at issue in the Pinnacle patent-enforcement litigation — was the same technology platform implicated in MTDC's BIPA exposure. A copy of the Round 1 report is attached hereto as Attachment A.

May 10, 2024 (same day): Rachel Bernstein promptly notified Jonathan Mercer of the potential conflict via internal email at 2:47 p.m. Eastern Time. Mercer responded the same day at 4:12 p.m. Eastern Time, confirming the scope and sensitivity of the Pinnacle engagement and noting that the Firm possesses extensive Pinnacle confidential technical architecture information regarding TruScan 360, including source-code architecture summaries, data-flow diagrams, biometric-data retention policies, algorithm design documents, and patent-prosecution correspondence. Mercer expressed his view that the conflict appeared serious and likely unwaivable, and he recommended escalation to the Conflicts Committee. The Bernstein–Mercer email exchange is attached hereto as Attachment D.

May 13, 2024: The Supplemental Conflicts Search Report (Round 2) was issued by Colleen Farrow's team. The Round 2 search expanded the scope of the conflicts analysis to include Pinnacle affiliates and subsidiaries, Pinnacle's known subcontractors, MTDC board members (individually and in their personal capacities), Veritas Biometrics Corp. (the defendant in the Pinnacle patent litigation), Lakefront Actuarial Advisors, LLC (MTDC's consulting actuary), and all individual named parties and counsel identified in the Cook County complaint and the AG's CID correspondence. The Round 2 report identified no additional conflicts beyond the Pinnacle conflict previously identified in Round 1. A copy of the Round 2 report is attached hereto as Attachment B.

May 13, 2024 (same day): Rachel Bernstein formally escalated the conflict to the Conflicts Committee via email to Lawrence Keating, Chair, Conflicts Committee, copying Helen Drazkowski, General Counsel, and Colleen Farrow, Director of Conflicts & New Business. Bernstein's escalation email requested that the Committee convene to review and determine the appropriate disposition of the proposed MTDC engagement in light of the identified conflict. This memorandum was prepared in response to that escalation and is submitted in advance of the Committee's meeting scheduled for May 14, 2024.

III. Description of the Proposed MTDC Engagement (Proposed Matter No. 1031-00001)

A. The Prospective Client

Metropolitan Transit Development Corp. 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 was created by referendum in 1968 and has operated continuously since that date as the principal public transit provider for the greater Chicago metropolitan area.

MTDC is headquartered at 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. It operates an integrated network of bus, commuter rail, and paratransit services across Cook County and five collar counties (DuPage, Kane, Lake, McHenry, and Will). The transit authority serves approximately 1.6 million daily riders across more than 130 fixed routes, 11 commuter rail lines, and an on-demand paratransit service.

MTDC's annual operating budget is approximately $3.2 billion, funded through a combination of farebox revenue, federal formula grants administered through the Federal Transit Administration under 49 U.S.C. § 5307, a dedicated 1.0% regional sales tax collected under the Regional Transportation Authority Act, 70 ILCS 3615/1 et seq., and State of Illinois general-fund appropriations. MTDC is governed by a nine-member Board of Directors appointed by the Governor of Illinois with the advice and consent of the Illinois Senate.

The following individuals have been identified as key MTDC personnel for purposes of this conflicts analysis:

• General Counsel: Terrence Whitfield

• Chief Information Security Officer (CISO): Lucia Marchetti

• Executive Director: Darnell Okafor

• EIN: 36-6041928

Per information provided by Terrence Whitfield during the May 6, 2024 telephone call with Rachel Bernstein, MTDC's annual outside-counsel budget across all matters is approximately $14.8 million. MTDC currently engages approximately twelve outside law firms across a range of practice areas, with Hargrove, Tillman & Reese LLP serving as its primary outside litigation counsel for matters other than biometric data-privacy and related regulatory enforcement.

B. The Underlying Matters Giving Rise to the Proposed Engagement

Two distinct but closely related legal proceedings give rise to the proposed MTDC engagement:

1. Illinois Attorney General's Civil Investigative Demand (CID Ref. CRB-2024-0417)

On April 22, 2024, the Illinois Attorney General's Bureau of Civil Rights issued a Civil Investigative Demand to MTDC under CID Reference Number CRB-2024-0417. The CID was issued under the authority of the Illinois Attorney General Act, 15 ILCS 205/6.1, and is led by Deputy Attorney General for Civil Rights Malcolm Jeffries. The CID alleges that MTDC's deployment of a biometric workforce-management platform — specifically, Pinnacle's TruScan 360 — violated the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seq., and the Illinois Personal Information Protection Act ("PIPA"), 815 ILCS 530/1 et seq.

The CID demands production of extensive documentation concerning MTDC's biometric data-collection practices, including all contracts with biometric technology vendors, all employee consent forms (or the absence thereof), all data-retention and destruction policies, all records of biometric data sharing with third parties, and all internal communications concerning the procurement and deployment of TruScan 360. The CID has a compliance deadline of June 21, 2024, with the possibility of extension upon a showing of good cause.

Significantly, the Attorney General's office has designated outside special counsel — Ridgeway & Falk LLP, located at 401 East Adams Street, Suite 300, Springfield, Illinois 62701, with lead partner Diane Falk supervising the engagement — to assist with the BIPA enforcement proceedings. The retention of specialized outside counsel by the AG's office signals an intent to pursue formal enforcement action, rather than to resolve the matter informally.

Of critical importance to this conflicts analysis, the AG's CID names Pinnacle Workforce Analytics, Inc. as a "responsible party" in connection with the alleged BIPA violations. The cover letter accompanying the CID states that the AG's office is "investigating the roles and responsibilities of all parties involved in the collection, storage, use, and dissemination of biometric identifiers and biometric information in connection with the TruScan 360 platform, including but not limited to the technology vendor, Pinnacle Workforce Analytics, Inc." The AG has indicated in subsequent correspondence with MTDC's counsel (Hargrove, Tillman & Reese) that it may name Pinnacle as a co-respondent in any formal enforcement action that follows the CID investigation.

2. Employee Class Action (Cook County Case No. 2024-CH-04417)

On April 29, 2024, one week after the AG's CID was issued, a putative class-action complaint was filed in the Circuit Court of Cook County, Chancery Division, bearing Case Number 2024-CH-04417. The complaint was filed on behalf of a putative class of approximately 12,400 current and former MTDC employees who were required to use the TruScan 360 biometric timekeeping and scheduling platform as a condition of employment.

The named plaintiff is Denise Carruthers, a twelve-year MTDC bus operator assigned to the 63rd Street Depot. The complaint alleges violations of BIPA § 15(a) (failure to establish a publicly available retention schedule and destruction guidelines), § 15(b) (failure to obtain informed written consent before collecting biometric identifiers), § 15(c) (prohibition on profiting from biometric data), § 15(d) (prohibition on disclosure without consent), and § 15(e) (failure to store, transmit, and protect biometric data using reasonable security measures). In addition to the BIPA claims, the complaint asserts causes of action for common-law invasion of privacy, breach of the implied covenant of good faith and fair dealing in the employment relationship, and violations of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq., arising from mandatory biometric clock-in/clock-out requirements.

Plaintiffs' class counsel is Kessler, Brandt & O'Neill LLP, located at 120 North LaSalle Street, Suite 2200, Chicago, Illinois 60602. Lead class counsel is Martin Kessler; co-counsel is Yolanda Brandt. The firm is well known in the Illinois plaintiffs' bar for BIPA class actions and has achieved several notable settlements and jury verdicts in BIPA litigation, including a $228 million jury verdict against a national retailer in 2023.

MTDC's estimated BIPA statutory-damages exposure, as calculated by its consulting actuary Lakefront Actuarial Advisors, LLC (principal: Felix Drummond, FSA, MAAA), ranges from $12,400,000 (12,400 class members multiplied by $1,000 per negligent violation under BIPA § 20) to $62,000,000 (12,400 class members multiplied by $5,000 per intentional or reckless violation under BIPA § 20). It bears noting that the Illinois Supreme Court's decision in Cothron v. White Castle System, Inc., 2023 IL 128004, held that a separate BIPA claim accrues each time a private entity scans or transmits an individual's biometric identifier or information without consent, which could significantly increase the per-employee damages calculation depending on the number of scans per employee over the relevant period. Plaintiffs' counsel has not yet quantified the per-employee scan count, but MTDC's internal records indicate that the average MTDC employee used the TruScan 360 biometric clock-in/clock-out function approximately 480 times per year. The potential exposure on a per-scan theory is, conservatively, orders of magnitude greater than the per-employee estimates provided by Lakefront Actuarial Advisors.

C. Proposed Scope of Representation

MTDC has requested that Calderwood & Harkness provide representation across the following five areas of work:

(a) Defense of the Illinois Attorney General's Civil Investigative Demand (CID Ref. CRB-2024-0417) and any anticipated formal BIPA enforcement action that may follow, including negotiations with the AG's office and Ridgeway & Falk LLP regarding the scope and timeline of MTDC's CID compliance, objections to overbroad document demands, and defense of any enforcement complaint or consent decree proceeding;

(b) Defense of the employee class action (Cook County Case No. 2024-CH-04417), including all pretrial proceedings, class-certification briefing, discovery, dispositive motions, trial preparation, and, if necessary, trial and post-trial proceedings;

(c) Advice on the remediation of MTDC's biometric-data practices, including the development of BIPA-compliant consent protocols, data-retention and destruction schedules, vendor-management policies, and employee-notification procedures, to mitigate ongoing liability and demonstrate good faith in connection with settlement negotiations or consent-decree compliance;

(d) Potential cross-claims and indemnification proceedings against MTDC's technology vendors, including and specifically Pinnacle Workforce Analytics, Inc., under the Master Software License and Services Agreement ("MSLA") dated June 15, 2021. The MSLA has a five-year initial term (June 15, 2021 through June 14, 2026) with an optional three-year renewal, and a total contract value of $8,700,000 ($1,740,000 per year). MTDC's General Counsel has indicated that the MSLA contains an indemnification provision (Section 14.2) requiring Pinnacle to indemnify MTDC for losses arising from the platform's failure to comply with applicable law. MTDC intends to enforce this provision aggressively; and

(e) Related employment counseling concerning MTDC's workforce-monitoring policies, including advice on the intersection of BIPA requirements with collective bargaining obligations under MTDC's agreements with the Amalgamated Transit Union Local 241 and Local 308.

D. Proposed Engagement Team and Financial Parameters

If the engagement were to proceed — which this memorandum recommends against — the proposed engagement team and financial parameters are as follows:

• Responsible Partner: Rachel Bernstein, Partner, Privacy & Data Security, Chicago office (One North Wacker Drive, Suite 4200, Chicago, Illinois 60606)

• Billing Partner: Miriam Calloway, Partner, Healthcare & Life Sciences, Chicago office

• Lead Associate: Devon Archer, Senior Associate, Labor & Employment, Chicago office

• Working Associate: Nadia Petrov, Associate, Labor & Employment, Chicago office

• Proposed hourly rates: Partner: $1,150/hr; Senior Associate: $785/hr; Junior Associate: $625/hr

• Estimated fees for proposed engagement: $3,500,000–$5,200,000 over approximately 18–24 months, depending on the trajectory of both the AG enforcement proceedings and the class-action litigation, including the possibility of trial

These financial estimates were prepared by Rachel Bernstein in consultation with the Firm's Pricing & Legal Project Management group and are based on comparable BIPA defense engagements handled by the Firm's Chicago office in the 2021–2023 period.

IV. Description of the Existing Pinnacle Engagement (Matter No. 1031-00001)

A. The Existing Client

Pinnacle Workforce Analytics, Inc. is a Delaware corporation with its registered agent at Cobalt Ridge Technologies, 1209 Orange Street, Wilmington, Delaware 19801. The company is headquartered at 11900 Sunrise Valley Drive, Suite 500, Reston, Virginia 20191.

Pinnacle develops, licenses, and supports biometric workforce-management software for enterprise and public-sector clients. Its flagship product is "TruScan 360," an AI-powered timekeeping, attendance, and workforce-scheduling platform that uses a suite of biometric identifiers — including fingerprint recognition, facial-geometry mapping, and iris-scan data — to authenticate employee identity, record time-and-attendance events, and generate workforce-optimization analytics.

Pinnacle's annual revenues are approximately $485 million, derived from software licensing fees, implementation services, and ongoing support and maintenance contracts. TruScan 360 is deployed by more than 340 enterprise clients across the United States, including public transit authorities, hospital systems, manufacturing facilities, and distribution centers. The company's EIN is 54-2198437.

The following individuals have been identified as key Pinnacle personnel for purposes of this conflicts analysis:

• Chief Executive Officer: Gregory Harmon

• General Counsel: Sandra Yee

B. Nature and Scope of the Existing Representation

Calderwood & Harkness has represented Pinnacle since 2019 in a series of patent-licensing, counseling, and enforcement matters related to the core biometric-recognition algorithms that power TruScan 360. The relationship originated with a patent-portfolio counseling engagement (Matter No. 1031-00001, now closed) and expanded into an active enforcement campaign beginning in 2021.

The currently active matter is Matter No. 1031-00001, opened March 14, 2022, and styled Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., U.S. District Court for the Eastern District of Virginia, Case No. 1:22-cv-01533, filed September 6, 2022. In this action, Pinnacle asserts patent-infringement claims against Veritas Biometrics Corp. ("Veritas"), a direct competitor located at 8200 Greensboro Drive, Suite 1100, McLean, Virginia 22102, whose CEO is Randall Cho. Veritas is represented by Whitmore & Sato LLP, 999 Waterside Drive, Suite 600, Norfolk, Virginia 23510, with lead partner Akira Sato.

The patent-infringement claims center on three utility patents — U.S. Patent Nos. 10,XXX,412; 10,XXX,978; and 11,XXX,301 — that cover TruScan 360's proprietary biometric-matching algorithms, multi-modal biometric fusion methodology, and adaptive-threshold calibration system. The litigation is currently in the expert-discovery phase, with a Markman hearing completed on February 16, 2024, and trial scheduled for January 13, 2025.

The Pinnacle engagement is staffed as follows:

• Responsible & Billing Partner: Jonathan Mercer, Partner, intellectual Property / Patent Litigation, Washington, D.C. office

• Lead Associate: Priya Subramaniam, Senior Associate, intellectual Property, Washington, D.C. office

The Firm's FY 2023 actual billings from the Pinnacle engagement totaled $2,137,500, based on Firm billing records for Matter No. 1031-00001. This figure reflects the increased activity associated with the Markman hearing preparation and the commencement of expert discovery. The Firm projects FY 2024 billings from Pinnacle to be in the range of $2,400,000–$2,800,000, given the upcoming trial preparation and trial.

C. Confidential Information in the Firm's Possession

Per Jonathan Mercer's confirmation in his internal email of May 10, 2024, the Firm possesses extensive Pinnacle confidential information that is directly relevant to TruScan 360's biometric data-collection, processing, storage, and dissemination practices. This confidential information includes, but is not limited to:

• Technical specifications for the TruScan 360 platform, including hardware interface requirements, software architecture documentation, and system integration protocols;

• Source-code architecture summaries describing the structure and logic of TruScan 360's biometric-matching algorithms;

• Data-flow diagrams illustrating how biometric identifiers and biometric information are collected, transmitted, processed, stored, and (where applicable) shared with third-party systems;

• Biometric-data retention policies, including Pinnacle's internal guidelines for data retention periods, data-destruction protocols, and data-backup procedures;

• Algorithm design documents describing the mathematical models and machine-learning methodologies employed by TruScan 360's facial-geometry, fingerprint, and iris-scan recognition systems; and

• Patent-prosecution correspondence with the United States Patent and Trademark Office, including inventor declarations, claim amendments, and prosecution-history estoppel arguments.

This information was provided to the Firm under the protection of the attorney-client privilege and Pinnacle's proprietary and trade-secret protections, and was necessary for the Firm's prosecution of Pinnacle's patent-infringement claims against Veritas. Critically, this information bears directly on the data-collection, storage, and dissemination practices at issue in the proposed MTDC engagement. A lawyer representing MTDC in BIPA proceedings arising from TruScan 360 would have a direct and substantial interest in obtaining precisely the type of technical and policy information that the Firm already possesses as Pinnacle's counsel.

D. The Pinnacle–MTDC Relationship

The factual nexus between the existing Pinnacle engagement and the proposed MTDC engagement is not limited to the shared technology platform. Pinnacle and MTDC have a direct contractual relationship that is central to the proposed MTDC representation.

Pinnacle sold and deployed TruScan 360 to MTDC under the Master Software License and Services Agreement ("MSLA") dated June 15, 2021. The MSLA provides for a five-year initial term (June 15, 2021 through June 14, 2026) with an optional three-year renewal at MTDC's election. The total contract value over the five-year initial term is $8,700,000, or $1,740,000 per year. The MSLA includes provisions for software licensing, platform customization, implementation services, ongoing technical support and maintenance, and software updates and upgrades. Importantly, as noted above, the MSLA contains an indemnification provision (Section 14.2) under which Pinnacle agreed to indemnify, defend, and hold harmless MTDC from and against losses, claims, damages, and expenses arising from the platform's failure to comply with applicable federal, state, or local law.

The Attorney General's CID (Ref. CRB-2024-0417) names Pinnacle as a "responsible party" in connection with the alleged BIPA violations at MTDC. The AG has indicated that Pinnacle may be named as a co-respondent in any formal enforcement action. MTDC's anticipated litigation strategy — as communicated by MTDC General Counsel Terrence Whitfield during the May 6, 2024 call with Rachel Bernstein — expressly includes cross-claims and indemnification demands against Pinnacle under Section 14.2 of the MSLA. It is MTDC's position that Pinnacle, as the designer, developer, and deployer of TruScan 360, bears primary responsibility for the platform's alleged BIPA non-compliance and should bear the costs and consequences of any resulting enforcement action, class-action liability, or remediation.

In short, the proposed MTDC engagement would require Calderwood & Harkness to take direct legal action against its existing client Pinnacle in the very area of technology — TruScan 360's biometric data-handling practices — in which the Firm currently represents Pinnacle's interests.

V. Conflicts Analysis Under the Illinois Rules of Professional Conduct

The proposed MTDC engagement is subject to the Illinois Rules of Professional Conduct, which govern the Firm's Chicago-office lawyers who would staff the engagement and which apply to the matters at issue in Illinois. The analysis below also considers the ABA Model Rules of Professional Conduct and relevant Illinois case law and ethics opinions, though the Illinois Rules are the primary governing authority.

A. Illinois Rule 1.7(a)(1) — Direct Adversity

Applicable Rule. Illinois Rule of Professional Conduct 1.7(a)(1) provides that, except as provided in paragraph (b), a lawyer shall not represent a client if the representation of that client will be directly adverse to another client. The rule applies regardless of whether the two representations are related and regardless of whether the matters are pending before the same tribunal. See Ill. R. Prof'l Conduct 1.7, cmt. [6] ("a directly adverse conflict may arise when a lawyer is asked to represent the seller of a business in negotiations against a buyer represented by the lawyer, not in the same transaction but in another, unrelated matter"); Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1321 (7th Cir. 1978) (applying direct-adversity prohibition where firm's concurrent representations involved the same industry and overlapping factual issues).

Analysis. The proposed MTDC engagement would require Calderwood & Harkness to take the following actions, each of which is directly adverse to the Firm's existing client Pinnacle:

First, the Firm would be required to defend MTDC against BIPA claims arising specifically from the deployment of Pinnacle's TruScan 360 platform. The defense of MTDC would necessarily require detailed analysis, characterization, and likely criticism of TruScan 360's biometric data-collection, storage, retention, and dissemination practices. An effective defense of MTDC would require the Firm to demonstrate that MTDC reasonably relied on Pinnacle's representations about TruScan 360's legal compliance, that Pinnacle controlled the platform's data-handling architecture, and that any BIPA violations were attributable to Pinnacle's design and deployment decisions rather than MTDC's operational choices. This strategy directly harms Pinnacle's interests by attributing BIPA liability to Pinnacle and characterizing Pinnacle's technology as non-compliant with applicable privacy law.

Second, the Firm would be required to pursue cross-claims and indemnification demands against Pinnacle under Section 14.2 of the MSLA. This is the most explicit form of direct adversity: the Firm would be asserting affirmative legal claims on behalf of one client (MTDC) directly against another current client (Pinnacle). The cross-claims would seek to recover from Pinnacle some or all of MTDC's defense costs, settlement payments, and damages liability — potentially amounting to tens of millions of dollars.

Third, the Firm would be required to characterize TruScan 360's biometric-data collection, storage, and dissemination practices as unlawful under BIPA and the Illinois Personal Information Protection Act in order to build a factual and legal foundation for MTDC's indemnification claims against Pinnacle. Characterizing a client's flagship product as an instrument of unlawful surveillance is about as directly adverse to that client's interests as legal advocacy can be.

Direct adversity is not negated by the fact that the matters are in different forums. The Pinnacle patent-enforcement litigation is pending in the Eastern District of Virginia, while the MTDC proceedings are in Cook County and before the Illinois Attorney General. However, Illinois Rule 1.7(a)(1) does not limit the direct-adversity prohibition to same-tribunal conflicts. The prohibition extends to any situation in which one representation is directly adverse to another client, regardless of the tribunals involved. See Ill. R. Prof'l Conduct 1.7, cmt. [6]; Fiduciary Duty, Inc. v. Parker, 2014 IL App (1st) 132269, ¶ 42 (finding direct adversity where concurrent representations involved different proceedings and different subject matter).

Direct adversity is heightened by the AG's identification of Pinnacle as a responsible party. The fact that the Illinois Attorney General has already designated Pinnacle as a "responsible party" in the CID and has indicated the possibility of naming Pinnacle as a co-respondent in enforcement proceedings means that the adversity between MTDC's interests and Pinnacle's interests is not merely theoretical or contingent. It is current, concrete, and escalating.

Conclusion. A concurrent-client conflict of interest exists under Illinois Rule of Professional Conduct 1.7(a)(1). The proposed MTDC representation would be directly adverse to the Firm's existing client Pinnacle.

B. Illinois Rule 1.7(a)(2) — Material Limitation

Applicable Rule. Illinois Rule of Professional Conduct 1.7(a)(2) provides that 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, a former client, or a third person, or by a personal interest of the lawyer. This rule encompasses situations where, even absent direct adversity in the litigation sense, the lawyer's duty of loyalty, duty of confidentiality, or duty of vigorous advocacy to one client creates a significant risk that the lawyer's professional judgment on behalf of another client will be compromised.

Analysis. The material-limitation conflict in this case is severe and multifaceted.

Diametrically opposed legal positions regarding TruScan 360. The Pinnacle patent-enforcement litigation (Matter No. 1031-00001) depends fundamentally on establishing the legitimacy, innovation, and commercial value of TruScan 360's biometric capabilities. The Firm's role in that litigation is to champion TruScan 360 as a cutting-edge, patentable, and commercially significant biometric platform — to persuade the court that TruScan 360's biometric-matching algorithms, multi-modal fusion methodology, and adaptive-threshold calibration system represent genuine innovation worthy of patent protection and enforcement. The proposed MTDC engagement would require the Firm to take the opposite position: that TruScan 360's biometric data-collection and processing capabilities constitute unlawful biometric-data practices in violation of BIPA and related privacy statutes. These positions are not merely "positionally inconsistent in unrelated matters" — they involve the identical technology platform, overlapping factual questions regarding TruScan 360's data-collection and retention practices, and require the Firm to develop contradictory factual narratives about the same product.

Compromise of the duty of loyalty. The Firm owes Pinnacle an undivided duty of loyalty in connection with the patent-enforcement litigation. That duty requires the Firm to advocate vigorously and single-mindedly for Pinnacle's interests, including the interest in maintaining TruScan 360's reputation as a lawful, innovative, and commercially valuable product. If the Firm were simultaneously representing MTDC in BIPA proceedings arising from TruScan 360, the Firm would face a constant and irreconcilable tension between its duty to advance Pinnacle's interests and its duty to advance MTDC's interests.

Compromise of the duty of confidentiality. As described in Section IV.C above, the Firm possesses extensive Pinnacle confidential information regarding TruScan 360's technical architecture, data-handling practices, and patent-prosecution history. This information is directly relevant to the proposed MTDC engagement. The Firm's lawyers representing MTDC would have a professional obligation to investigate and develop the factual record regarding TruScan 360's biometric data practices — the very subject matter about which the Firm already possesses Pinnacle's confidential information. Even if the Firm could construct an ethical wall to prevent formal disclosure of Pinnacle's confidential information to the MTDC engagement team, the mere existence of that information within the Firm creates an intolerable risk that the Firm's advocacy for MTDC would be either enhanced by (or constrained to avoid the appearance of using) Pinnacle's confidential information. Either outcome constitutes a material limitation on the Firm's ability to represent one or both clients competently and diligently.

Compromise of the Firm's advocacy for MTDC. The material-limitation analysis runs in both directions. If the Firm were representing MTDC, the Firm's advocacy on MTDC's behalf would be materially limited by the Firm's concurrent obligations to Pinnacle. The Firm would be unable to take the most aggressive litigation positions against Pinnacle's technology, to pursue the most favorable indemnification arguments on MTDC's behalf, or to characterize Pinnacle's conduct in the most damaging light — because doing so would directly harm another client of the Firm and violate the duty of loyalty owed to that client. MTDC would be entitled to expect its lawyers to pursue every available avenue of defense and every meritorious claim against responsible parties, including Pinnacle. The Firm's divided loyalties would prevent it from meeting that expectation.

Conclusion. A material-limitation conflict of interest exists under Illinois Rule of Professional Conduct 1.7(a)(2). The Firm's responsibilities to Pinnacle would materially limit its ability to represent MTDC competently and diligently, and vice versa.

C. Illinois Rule 1.7(b) — Waivability / Consent Analysis

Applicable Rule. Illinois Rule of Professional Conduct 1.7(b) provides that, 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;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.

All four prongs must be satisfied for consent to cure a conflict. The analysis below addresses each prong.

Prong 1 — Reasonable belief of competent and diligent representation. This prong imposes an objective standard: it is not sufficient that the lawyer subjectively believes he or she can provide competent representation; the belief must be one that a disinterested lawyer would find objectively reasonable. See Ill. R. Prof'l Conduct 1.7, cmt. [15] ("the mere willingness of the lawyer or the clients to consent is not dispositive").

No reasonable lawyer could conclude that the Firm can simultaneously: (i) argue in the Eastern District of Virginia that TruScan 360 is a legitimate, innovative, and commercially valuable biometric platform deserving of patent protection and enforcement against competitors (for Pinnacle); while (ii) arguing in Cook County and before the Illinois Attorney General that the same platform's biometric-data practices are unlawful under BIPA and PIPA (for MTDC); while (iii) pursuing cross-claims and indemnification demands against Pinnacle on behalf of MTDC, seeking to recover potentially tens of millions of dollars from Pinnacle based on the very technology the Firm is championing in the patent case.

The legal positions are not merely "positionally inconsistent in unrelated matters" — a circumstance that might, in limited cases, be waivable. Rather, they involve the identical technology platform, overlapping and identical factual questions regarding TruScan 360's data-collection, processing, retention, and dissemination practices, and the Firm's possession of Pinnacle's confidential technical information that is directly relevant to the MTDC claims. The inconsistency is not abstract or theoretical; it is concrete, operational, and present in virtually every aspect of both engagements. A disinterested lawyer reviewing the circumstances would conclude that it is not possible for the Firm to provide competent and diligent representation to both MTDC and Pinnacle simultaneously.

Accordingly, Prong 1 is not satisfied. The conflict cannot be cured by consent on this ground alone.

Prong 2 — Not prohibited by law. There is no specific statute or regulation that would prohibit the dual representation. This prong is likely satisfied, though it does not affect the overall analysis given the failure of Prongs 1 and 3.

Prong 3 — No assertion of a claim by one client against another in the same litigation or proceeding. Although the existing Pinnacle patent litigation and the proposed MTDC proceedings are currently pending in different tribunals (E.D. Va. vs. Cook County and the Illinois AG's office), the proposed MTDC engagement expressly contemplates the assertion of cross-claims and indemnification demands against Pinnacle. If MTDC asserts cross-claims against Pinnacle in the Cook County class action, the Firm would be asserting claims on behalf of one of its clients (MTDC) directly against another of its clients (Pinnacle) before the same tribunal — the Circuit Court of Cook County. This is precisely the scenario that Prong 3 is designed to prevent.

Moreover, there is a significant probability that the AG's enforcement action will also name Pinnacle as a co-respondent. If that occurs, MTDC and Pinnacle would be parties in the same proceeding before the same tribunal, with the Firm representing both — on opposing sides.

Prong 3 independently bars consent. The conflict is non-consentable on this ground.

Prong 4 — Informed consent, confirmed in writing. Even if consent were theoretically possible under Prongs 1 through 3 — which it is not — the practical mechanics of obtaining informed consent present an independent barrier. Informed consent requires that each affected client be provided with "adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct." Ill. R. Prof'l Conduct 1.0(e). To obtain Pinnacle's informed consent, the Firm would need to disclose the nature of the proposed MTDC engagement, including the fact that MTDC intends to pursue cross-claims and indemnification demands against Pinnacle. Such disclosure could compromise MTDC's litigation strategy and its interests as a prospective client. Conversely, to obtain MTDC's informed consent, the Firm would need to disclose the nature and scope of the existing Pinnacle engagement and the type of confidential information in the Firm's possession — disclosure that could compromise Pinnacle's interests.

In any event, because the conflict fails Prongs 1 and 3, consent would not cure the conflict even if both clients were willing to provide it. This is a conflict that the Rules do not permit to be waived, regardless of the sophistication or willingness of the clients.

Overall waivability conclusion. The conflict is not waivable by consent. The conflict fails Prong 1 (no reasonable belief of competent and diligent representation) and Prong 3 (assertion of claims by one client against another in the same proceeding) of the Rule 1.7(b) waivability test. Each failure is independently sufficient to render the conflict non-consentable. Together, they leave no doubt that consent cannot cure this conflict.

D. Consideration of Illinois Rule 1.9 — Former-Client Analysis (Inapplicable but Noted)

Illinois Rule of Professional Conduct 1.9 governs duties to former clients. It provides, in relevant part, that a lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client, unless the former client gives informed consent, confirmed in writing. Ill. R. Prof'l Conduct 1.9(a).

Rule 1.9 does not apply here because Pinnacle is a current, not former, client of the Firm. Matter No. 1031-00001 is active and ongoing, with trial scheduled for January 13, 2025. There has been no termination of the attorney-client relationship and no closure of the matter.

However, for completeness, and to address the hypothetical that the Conflicts Committee might consider whether the conflict could be resolved by withdrawing from the Pinnacle engagement to convert Pinnacle to a former client, the following is noted: Even if Pinnacle were a former client, the proposed MTDC engagement and the Pinnacle engagement are substantially related — both center on TruScan 360's biometric data-handling capabilities — and the Firm possesses confidential information from the Pinnacle engagement that is material to the proposed MTDC engagement. Accordingly, the conflict would also be barred under Rule 1.9(a), and consent from Pinnacle would still be required. Moreover, withdrawing from the Pinnacle engagement solely to accept the MTDC engagement would itself raise serious ethical concerns regarding the duty of loyalty and the prohibition on "dropping" a client to circumvent the concurrent-conflict rules. See Ill. R. Prof'l Conduct 1.7, cmt. [4] ("a lawyer may not drop a client in order to resolve a conflict"); Picker Int'l, Inc. v. Varian Assocs., Inc., 869 F.2d 578, 584 (Fed. Cir. 1989) (condemning the "hot potato" doctrine). This alternative is therefore not a viable path forward.

E. Consideration of Illinois Rule 1.10 — Imputation and Screening

Applicable Rule. Illinois Rule of Professional Conduct 1.10 addresses the imputation of conflicts within a law firm. In general, while a lawyer is associated with a firm, no lawyer associated in the firm shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9. Ill. R. Prof'l Conduct 1.10(a). Illinois adopted a limited screening exception in 2010, codified in Rule 1.10(e), which permits screening to avoid imputation of a conflict that arises solely from a lawyer's association with a prior firm — i.e., the lateral-hire screening exception.

Question Presented. Could the conflict be cured by erecting a formal ethical screen (sometimes called a "Chinese wall") between Jonathan Mercer and the Pinnacle engagement team, on the one hand, and Rachel Bernstein and the proposed MTDC engagement team, on the other?

Analysis. The conflict in this case does not arise from a lateral-hire situation. The conflict arises from the concurrent representation of two clients by current partners of the Firm. Jonathan Mercer has been a partner at Calderwood & Harkness since 2016 and has represented Pinnacle since 2019. The conflict is not attributable to Mercer's association with a prior firm; it is attributable to the Firm's own existing client relationship. The lateral-screening exception under Rule 1.10(e) is, by its terms, inapplicable.

Illinois has not adopted a general screening exception for concurrent-client conflicts arising within a firm. The comments to Rule 1.10 and the Illinois State Bar Association's ethics opinions confirm that screening is not available to cure a concurrent-representation conflict of the type presented here. See ISBA Advisory Op. 13-03 (2013) (screening permitted only in lateral-hire context under Rule 1.10(e); not available for concurrent-client conflicts under Rule 1.7).

Conclusion. Screening does not provide a cure for the conflict. The entire Firm is disqualified from accepting the proposed MTDC engagement for as long as the Pinnacle engagement remains active.

VI. Financial Considerations

The following financial information is provided for the Conflicts Committee's awareness. Financial considerations do not drive the ethical analysis, and the General Counsel wishes to emphasize that the recommendation to decline the proposed MTDC engagement is based solely on the ethical analysis set forth in Section V above. Nevertheless, the Committee should be aware of the financial dimensions of the decision.

Estimated foregone fees from declining the MTDC engagement. Based on the fee estimates prepared by Rachel Bernstein and the Firm's Pricing & Legal Project Management group, declining the proposed MTDC engagement would result in foregone fees in the range of $3,500,000 to $5,200,000 over approximately 18 to 24 months. This represents a significant revenue opportunity, particularly for the Firm's Chicago office and the Privacy & Data Security practice group. The engagement would also have provided an opportunity to deepen the Firm's relationship with a major public-sector client and to build precedent in an area of rapidly evolving Illinois privacy law.

Annual Pinnacle billings. The Firm's FY 2023 actual billings from Pinnacle under Matter No. 1031-00001 totaled $2,137,500. Projected FY 2024 billings are in the range of $2,400,000 to $2,800,000, reflecting the upcoming trial preparation and trial in Pinnacle v. Veritas Biometrics Corp. Beyond the immediate matter, Pinnacle has been a client of the Firm since 2019 and represents an ongoing relationship with significant potential for future engagements, including additional patent-enforcement actions, IP counseling, and potential M&A work.

Comparative analysis. The MTDC engagement would represent a larger single-matter fee opportunity than the current Pinnacle engagement. However, the Pinnacle relationship is longer-standing, involves a higher degree of institutional trust and confidential-information sharing, and has significant potential for expansion beyond the current active matter. Moreover, the reputational and disciplinary risk of accepting the MTDC engagement in the face of an unwaivable conflict far outweighs any revenue benefit.

Administrative costs. No billable time has been or will be generated in connection with this conflicts-clearance process. The Conflicts Committee review is an internal administrative matter at zero cost to any client. The time spent by the General Counsel, the Conflicts & New Business team, and the involved partners on this review is absorbed by the Firm as an overhead expense and is not charged to any client matter.

The ethical obligation to avoid unwaivable conflicts is paramount and supersedes all financial considerations. The Firm's reputation for ethical rigor and its standing before the courts and bar disciplinary authorities are institutional assets of far greater value than any individual engagement.

VII. Preliminary Recommendation

Based on the foregoing analysis, the General Counsel's preliminary recommendation is as follows:

1. The proposed MTDC engagement (Proposed Matter No. 1031-00001) should be declined.

The conflict with existing client Pinnacle Workforce Analytics, Inc. (Matter No. 1031-00001) constitutes a non-waivable concurrent-client conflict under Illinois Rules of Professional Conduct 1.7(a)(1) (direct adversity) and 1.7(a)(2) (material limitation). The waivability analysis under Rule 1.7(b) confirms that consent cannot cure the conflict because: (a) no reasonable lawyer could conclude that the Firm can provide competent and diligent representation to both MTDC and Pinnacle simultaneously (Prong 1 failure); and (b) the proposed engagement contemplates the assertion of claims by MTDC against Pinnacle, likely before the same tribunal (Prong 3 failure). Screening under Rule 1.10 is unavailable because the conflict arises from a concurrent representation by a current Firm partner, not from a lateral hire.

2. Communication of the declination to MTDC. The Firm should communicate the declination to MTDC's General Counsel, Terrence Whitfield, promptly following the Conflicts Committee's approval. The declination communication should be made in appropriately general terms, stating only that the Firm has identified a conflict of interest that prevents it from accepting the engagement. The communication should not disclose the identity of the existing client, the nature of the existing engagement, or any specifics of the conflict. The Firm's duty of confidentiality to Pinnacle precludes any such disclosure.

3. Referral to alternative counsel. The Firm should offer to facilitate a referral to qualified alternative counsel with demonstrated BIPA and biometric data-privacy expertise and no conflicts of interest with respect to the MTDC matters. Potential referral candidates include, without limitation:

• Sanderson, Pryce & Gutierrez LLP (Chicago, IL) — nationally recognized BIPA defense practice

• Callahan & Yun LLP (Chicago, IL) — significant public-sector privacy-law experience

• The privacy and data-security practice groups at other Am Law 100 firms without Pinnacle relationships (to be confirmed by Colleen Farrow through a discreet inquiry)

4. Confirmation regarding Pinnacle confidential information. The Firm should confirm to the Pinnacle engagement partner, Jonathan Mercer, and to Pinnacle's General Counsel, Sandra Yee (if inquiries are made), that no Pinnacle confidential information was disclosed to any member of the proposed MTDC engagement team or to MTDC's General Counsel during the intake and conflicts-clearance process. Based on the General Counsel's review of the procedural history, no such disclosure occurred. Rachel Bernstein's initial telephone conversation with Terrence Whitfield on May 6, 2024, did not involve the exchange of any information about Pinnacle or about the Firm's existing client relationships. The conflicts-clearance process was conducted internally, and no substantive MTDC work was performed before the conflict was identified.

5. Documentation and database updates. The Conflicts & New Business team should update the Firm's conflicts database to reflect the declination of the proposed MTDC engagement, including cross-referencing MTDC as a declined prospective client associated with the Pinnacle conflict (Matter No. 1031-00001). The intake file for Proposed Matter No. 1031-00001 should be closed and retained in accordance with the Firm's records-retention policies.

VIII. Items for Conflicts Committee Discussion (May 14, 2024 Meeting)

The following items are submitted for the Conflicts Committee's discussion and consideration at its meeting scheduled for May 14, 2024:

1. Confirmation of unwaivability determination. The Committee is requested to review and confirm the General Counsel's determination that the conflict between the proposed MTDC engagement and the existing Pinnacle engagement is unwaivable under Illinois Rules of Professional Conduct 1.7(a)(1), 1.7(a)(2), and 1.7(b). If any member of the Committee disagrees with the analysis or identifies additional considerations, those views should be raised and discussed.

2. Approval of recommended course of action. The Committee is requested to approve the recommended course of action, which consists of: (a) declining the proposed MTDC engagement; (b) communicating the declination to MTDC's General Counsel; (c) offering to facilitate a referral to qualified alternative counsel; and (d) confirming to the Pinnacle engagement partner that no confidential information was compromised.

3. Declination letter language. The Committee should discuss and approve appropriate language for the declination communication to MTDC. The communication must strike a careful balance between providing a sufficient explanation for the declination (to preserve the Firm's professional reputation and relationship with MTDC and the referring firm, Hargrove, Tillman & Reese LLP) and protecting Pinnacle's identity and confidential information. The General Counsel will prepare a draft declination letter for the Committee's review and will circulate it prior to or at the meeting.

4. Conflicts database updates and cross-referencing. The Committee should confirm the steps to be taken by the Conflicts & New Business team to update the Firm's conflicts database, including: (a) recording MTDC as a declined prospective client; (b) cross-referencing the declined MTDC matter (Proposed Matter No. 1031-00001) with the existing Pinnacle matter (Matter No. 1031-00001); (c) noting the basis for the declination in the conflicts record; and (d) flagging MTDC and its key personnel for future conflicts screening in the event circumstances change (e.g., if the Pinnacle engagement concludes and the Firm is subsequently approached by MTDC on a different matter).

5. Communication to referring firm. The Committee should consider whether any communication should be made to Constance Hargrove at Hargrove, Tillman & Reese LLP regarding the declination. As the source of the referral, Ms. Hargrove may inquire about the outcome. Any communication to Ms. Hargrove should be limited to the fact that the Firm identified a conflict and was unable to accept the engagement, with no further detail.

6. Communication to Rachel Bernstein and engagement team. The Committee should confirm that Rachel Bernstein and the proposed engagement team (Miriam Calloway, Devon Archer, and Nadia Petrov) are informed of the declination and the reasons therefor in sufficient detail to ensure compliance with the Firm's conflicts policies, without disclosing specific Pinnacle confidential information.

7. Any additional considerations. The Committee should address any additional considerations that members may wish to raise, including any implications for the Firm's broader BIPA practice, any lessons learned for the intake and conflicts-screening process, and any adjustments to the Firm's conflicts protocols that the Committee believes would be beneficial.

IX. Attachments

The following documents are referenced in this memorandum and are attached hereto for the Conflicts Committee's review. These attachments are subject to the same privilege and confidentiality protections as this memorandum and are not to be distributed beyond the named recipients without the prior written consent of the General Counsel.

Attachment A: Conflicts Search Report — Round 1 (issued May 10, 2024, prepared by Colleen Farrow, Director, Conflicts & New Business)

Attachment B: Supplemental Conflicts Search Report — Round 2 (issued May 13, 2024, prepared by Colleen Farrow, Director, Conflicts & New Business)

Attachment C: New-Matter Intake Request Form (C&H Form NM-1) — Proposed Matter No. 1031-00001 (submitted May 9, 2024, by Rachel Bernstein, Partner, Privacy & Data Security)

Attachment D: Internal email correspondence between Rachel Bernstein and Jonathan Mercer (May 10, 2024), including Mercer's confirmation of the scope and sensitivity of the Pinnacle engag

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT PRIVILEGE
FOR CONFLICTS COMMITTEE USE ONLY
This memorandum was prepared by the Office of the General Counsel of Calderwood & Harkness LLP in anticipation of the Conflicts Committee meeting of May 14, 2024. It is protected by the attorney-client privilege, the work-product doctrine, and the firm's internal deliberative-process protections. Distribution beyond the named recipients is strictly prohibited without the prior written consent of the General Counsel. Any unauthorized review, use, disclosure, or distribution is prohibited.
From: Helen Drazkowski, General Counsel, Calderwood & Harkness LLP
To: Lawrence Keating, Senior Partner & Chair, Conflicts Committee
Cc: Colleen Farrow, Director, Conflicts & New Business Rachel Bernstein, Partner, Privacy & Data Security Jonathan Mercer, Partner, intellectual Property / Patent Litigation
Date: May 13, 2024
Re: DRAFT — Conflicts Analysis: Proposed Representation of Metropolitan Transit Development Corp. (Proposed Matter No. 1031-00001) — Conflict with Existing Client Pinnacle Workforce Analytics, Inc. (Matter No. 1031-00001)
I. Executive Summary
Calderwood & Harkness LLP ("the Firm" or "C&H") has been approached by Metropolitan Transit Development Corp. ("MTDC"), a governmental transit authority organized under the Illinois Local Mass Transit District Act, 70 ILCS 3610/1 et seq., and headquartered at 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. MTDC seeks to retain the Firm as outside counsel in connection with a data-privacy enforcement action initiated by the Illinois Attorney General and related employment class-action litigation pending in the Circuit Court of Cook County. The proposed engagement has been assigned Proposed Matter No. 1031-00001 for internal tracking purposes.
The Firm's standard conflicts-clearance process, initiated on May 9, 2024, upon receipt of a completed New-Matter Intake Request Form (C&H Form NM-1) from Rachel Bernstein, Partner, Privacy & Data Security, identified that the Firm currently represents Pinnacle Workforce Analytics, Inc. ("Pinnacle"), a Delaware corporation headquartered in Reston, Virginia, in active patent-licensing and enforcement matters under Matter No. 1031-00001. The Pinnacle engagement is led by Jonathan Mercer, Partner, intellectual Property / Patent Litigation, and involves the same biometric workforce-management platform — Pinnacle's flagship product, "TruScan 360" — that is at the center of the proposed MTDC engagement.
The intersection between these matters is not tangential. Pinnacle is MTDC's former workforce-surveillance technology vendor and is specifically named as a "responsible party" in the Illinois Attorney General's Civil Investigative Demand (CID Ref. CRB-2024-0417) served upon MTDC. The Attorney General has indicated publicly and in correspondence with MTDC that it may name Pinnacle as a co-respondent in anticipated enforcement proceedings. MTDC's contemplated litigation strategy, as described by MTDC's General Counsel during preliminary discussions with Rachel Bernstein, expressly includes cross-claims and indemnification demands against Pinnacle under the parties' Master Software License and Services Agreement ("MSLA") dated June 15, 2021.
Based on the analysis set forth in detail below, the General Counsel's preliminary recommendation is that the conflict between the proposed MTDC engagement and the existing Pinnacle engagement is likely unwaivable under Illinois Rules of Professional Conduct 1.7(a)(1) (direct adversity) and 1.7(a)(2) (material limitation). The conflict fails the waivability test under Rule 1.7(b) on multiple independent grounds, and consent from both affected clients would not cure the conflict. Screening under Rule 1.10 is unavailable because the conflict arises from a concurrent representation by a current Firm partner rather than from a lateral hire. Accordingly, the Firm should decline the proposed MTDC engagement.
This draft memorandum is submitted for the Conflicts Committee's review and deliberation at its meeting scheduled for May 14, 2024, at 10:00 a.m. Central Time in Conference Room 42-A of the Firm's Chicago office. All members of the Conflicts Committee are requested to review this memorandum and the attached supporting documents in advance of the meeting.
II. Procedural History of the Intake
The following chronology sets forth the procedural history of the MTDC intake request and the identification and escalation of the conflict:
May 6, 2024: MTDC General Counsel Terrence Whitfield contacted Rachel Bernstein, Partner, Privacy & Data Security, in the Firm's Chicago office, by telephone. The contact was made following a referral from Constance Hargrove, lead partner at Hargrove, Tillman & Reese LLP, located at 233 South Wacker Drive, Suite 5600, Chicago, Illinois 60606. Hargrove, Tillman & Reese serves as MTDC's existing outside litigation counsel for general tort defense, insurance coverage, and construction disputes. According to both Mr. Whitfield and Ms. Hargrove, the referring firm specifically directed MTDC to Calderwood & Harkness because of the Firm's nationally recognized expertise in biometric data-privacy law and class-action defense — expertise that Hargrove, Tillman & Reese candidly acknowledged it lacked in-house. During the initial telephone call, Mr. Whitfield described the general nature of the matters at issue, including the Attorney General's CID and the Cook County employee class action. Rachel Bernstein did not enter into any engagement, make any substantive legal recommendations, or receive any confidential information beyond the publicly available case filings during this initial call. She informed Mr. Whitfield that the Firm would need to conduct its standard conflicts-clearance process before any engagement could be formalized.
May 9, 2024: Rachel Bernstein completed and submitted a New-Matter Intake Request Form (C&H Form NM-1) for Proposed Matter No. 1031-00001. The form identified MTDC as the prospective client and described the proposed engagement scope as defense of the AG CID, defense of the employee class action, biometric data-practice remediation advice, potential cross-claims against technology vendors (including Pinnacle), and related employment counseling. Bernstein simultaneously submitted a Conflicts Search Request Memorandum to Colleen Farrow, Director of Conflicts & New Business, requesting a comprehensive Round 1 search across all Firm databases, including the client-matter database, the conflicts-clearance system, the new-business pipeline database, historical billing records, and the lateral-hire disclosure database. The Round 1 search was initiated the same day.
May 9, 2024 (same day): The Round 1 conflicts search was run by the Conflicts & New Business team across all Firm databases. The search covered the following search terms and entities: "Metropolitan Transit Development Corp.," "MTDC," "Terrence Whitfield," "Lucia Marchetti," "Darnell Okafor," "TruScan 360," "Pinnacle Workforce Analytics," "biometric workforce management," "BIPA," "Cook County Case No. 2024-CH-04417," and related terms. The search also cross-referenced all named parties identified in the publicly available Cook County complaint and the AG's CID cover letter.
May 10, 2024: The Conflicts Search Report (Round 1) was issued by Colleen Farrow's team and distributed to Rachel Bernstein, Helen Drazkowski, and Lawrence Keating. The Round 1 report identified a direct match: Pinnacle Workforce Analytics, Inc. is an existing client of the Firm, currently represented under Matter No. 1031-00001 by Jonathan Mercer, Partner, intellectual Property / Patent Litigation. The report flagged both direct-adversity concerns (Rule 1.7(a)(1)) and material-limitation concerns (Rule 1.7(a)(2)). The report also noted that Pinnacle's TruScan 360 platform — the product at issue in the Pinnacle patent-enforcement litigation — was the same technology platform implicated in MTDC's BIPA exposure. A copy of the Round 1 report is attached hereto as Attachment A.
May 10, 2024 (same day): Rachel Bernstein promptly notified Jonathan Mercer of the potential conflict via internal email at 2:47 p.m. Eastern Time. Mercer responded the same day at 4:12 p.m. Eastern Time, confirming the scope and sensitivity of the Pinnacle engagement and noting that the Firm possesses extensive Pinnacle confidential technical architecture information regarding TruScan 360, including source-code architecture summaries, data-flow diagrams, biometric-data retention policies, algorithm design documents, and patent-prosecution correspondence. Mercer expressed his view that the conflict appeared serious and likely unwaivable, and he recommended escalation to the Conflicts Committee. The Bernstein–Mercer email exchange is attached hereto as Attachment D.
May 13, 2024: The Supplemental Conflicts Search Report (Round 2) was issued by Colleen Farrow's team. The Round 2 search expanded the scope of the conflicts analysis to include Pinnacle affiliates and subsidiaries, Pinnacle's known subcontractors, MTDC board members (individually and in their personal capacities), Veritas Biometrics Corp. (the defendant in the Pinnacle patent litigation), Lakefront Actuarial Advisors, LLC (MTDC's consulting actuary), and all individual named parties and counsel identified in the Cook County complaint and the AG's CID correspondence. The Round 2 report identified no additional conflicts beyond the Pinnacle conflict previously identified in Round 1. A copy of the Round 2 report is attached hereto as Attachment B.
May 13, 2024 (same day): Rachel Bernstein formally escalated the conflict to the Conflicts Committee via email to Lawrence Keating, Chair, Conflicts Committee, copying Helen Drazkowski, General Counsel, and Colleen Farrow, Director of Conflicts & New Business. Bernstein's escalation email requested that the Committee convene to review and determine the appropriate disposition of the proposed MTDC engagement in light of the identified conflict. This memorandum was prepared in response to that escalation and is submitted in advance of the Committee's meeting scheduled for May 14, 2024.
III. Description of the Proposed MTDC Engagement (Proposed Matter No. 1031-00001)
A. The Prospective Client
Metropolitan Transit Development Corp. 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 was created by referendum in 1968 and has operated continuously since that date as the principal public transit provider for the greater Chicago metropolitan area.
MTDC is headquartered at 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. It operates an integrated network of bus, commuter rail, and paratransit services across Cook County and five collar counties (DuPage, Kane, Lake, McHenry, and Will). The transit authority serves approximately 1.6 million daily riders across more than 130 fixed routes, 11 commuter rail lines, and an on-demand paratransit service.
MTDC's annual operating budget is approximately $3.2 billion, funded through a combination of farebox revenue, federal formula grants administered through the Federal Transit Administration under 49 U.S.C. § 5307, a dedicated 1.0% regional sales tax collected under the Regional Transportation Authority Act, 70 ILCS 3615/1 et seq., and State of Illinois general-fund appropriations. MTDC is governed by a nine-member Board of Directors appointed by the Governor of Illinois with the advice and consent of the Illinois Senate.
The following individuals have been identified as key MTDC personnel for purposes of this conflicts analysis:
•  General Counsel: Terrence Whitfield
•  Chief Information Security Officer (CISO): Lucia Marchetti
•  Executive Director: Darnell Okafor
•  EIN: 36-6041928
Per information provided by Terrence Whitfield during the May 6, 2024 telephone call with Rachel Bernstein, MTDC's annual outside-counsel budget across all matters is approximately $14.8 million. MTDC currently engages approximately twelve outside law firms across a range of practice areas, with Hargrove, Tillman & Reese LLP serving as its primary outside litigation counsel for matters other than biometric data-privacy and related regulatory enforcement.
B. The Underlying Matters Giving Rise to the Proposed Engagement
Two distinct but closely related legal proceedings give rise to the proposed MTDC engagement:
1. Illinois Attorney General's Civil Investigative Demand (CID Ref. CRB-2024-0417)
On April 22, 2024, the Illinois Attorney General's Bureau of Civil Rights issued a Civil Investigative Demand to MTDC under CID Reference Number CRB-2024-0417. The CID was issued under the authority of the Illinois Attorney General Act, 15 ILCS 205/6.1, and is led by Deputy Attorney General for Civil Rights Malcolm Jeffries. The CID alleges that MTDC's deployment of a biometric workforce-management platform — specifically, Pinnacle's TruScan 360 — violated the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seq., and the Illinois Personal Information Protection Act ("PIPA"), 815 ILCS 530/1 et seq.
The CID demands production of extensive documentation concerning MTDC's biometric data-collection practices, including all contracts with biometric technology vendors, all employee consent forms (or the absence thereof), all data-retention and destruction policies, all records of biometric data sharing with third parties, and all internal communications concerning the procurement and deployment of TruScan 360. The CID has a compliance deadline of June 21, 2024, with the possibility of extension upon a showing of good cause.
Significantly, the Attorney General's office has designated outside special counsel — Ridgeway & Falk LLP, located at 401 East Adams Street, Suite 300, Springfield, Illinois 62701, with lead partner Diane Falk supervising the engagement — to assist with the BIPA enforcement proceedings. The retention of specialized outside counsel by the AG's office signals an intent to pursue formal enforcement action, rather than to resolve the matter informally.
Of critical importance to this conflicts analysis, the AG's CID names Pinnacle Workforce Analytics, Inc. as a "responsible party" in connection with the alleged BIPA violations. The cover letter accompanying the CID states that the AG's office is "investigating the roles and responsibilities of all parties involved in the collection, storage, use, and dissemination of biometric identifiers and biometric information in connection with the TruScan 360 platform, including but not limited to the technology vendor, Pinnacle Workforce Analytics, Inc." The AG has indicated in subsequent correspondence with MTDC's counsel (Hargrove, Tillman & Reese) that it may name Pinnacle as a co-respondent in any formal enforcement action that follows the CID investigation.
2. Employee Class Action (Cook County Case No. 2024-CH-04417)
On April 29, 2024, one week after the AG's CID was issued, a putative class-action complaint was filed in the Circuit Court of Cook County, Chancery Division, bearing Case Number 2024-CH-04417. The complaint was filed on behalf of a putative class of approximately 12,400 current and former MTDC employees who were required to use the TruScan 360 biometric timekeeping and scheduling platform as a condition of employment.
The named plaintiff is Denise Carruthers, a twelve-year MTDC bus operator assigned to the 63rd Street Depot. The complaint alleges violations of BIPA § 15(a) (failure to establish a publicly available retention schedule and destruction guidelines), § 15(b) (failure to obtain informed written consent before collecting biometric identifiers), § 15(c) (prohibition on profiting from biometric data), § 15(d) (prohibition on disclosure without consent), and § 15(e) (failure to store, transmit, and protect biometric data using reasonable security measures). In addition to the BIPA claims, the complaint asserts causes of action for common-law invasion of privacy, breach of the implied covenant of good faith and fair dealing in the employment relationship, and violations of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq., arising from mandatory biometric clock-in/clock-out requirements.
Plaintiffs' class counsel is Kessler, Brandt & O'Neill LLP, located at 120 North LaSalle Street, Suite 2200, Chicago, Illinois 60602. Lead class counsel is Martin Kessler; co-counsel is Yolanda Brandt. The firm is well known in the Illinois plaintiffs' bar for BIPA class actions and has achieved several notable settlements and jury verdicts in BIPA litigation, including a $228 million jury verdict against a national retailer in 2023.
MTDC's estimated BIPA statutory-damages exposure, as calculated by its consulting actuary Lakefront Actuarial Advisors, LLC (principal: Felix Drummond, FSA, MAAA), ranges from $12,400,000 (12,400 class members multiplied by $1,000 per negligent violation under BIPA § 20) to $62,000,000 (12,400 class members multiplied by $5,000 per intentional or reckless violation under BIPA § 20). It bears noting that the Illinois Supreme Court's decision in Cothron v. White Castle System, Inc., 2023 IL 128004, held that a separate BIPA claim accrues each time a private entity scans or transmits an individual's biometric identifier or information without consent, which could significantly increase the per-employee damages calculation depending on the number of scans per employee over the relevant period. Plaintiffs' counsel has not yet quantified the per-employee scan count, but MTDC's internal records indicate that the average MTDC employee used the TruScan 360 biometric clock-in/clock-out function approximately 480 times per year. The potential exposure on a per-scan theory is, conservatively, orders of magnitude greater than the per-employee estimates provided by Lakefront Actuarial Advisors.
C. Proposed Scope of Representation
MTDC has requested that Calderwood & Harkness provide representation across the following five areas of work:
(a) Defense of the Illinois Attorney General's Civil Investigative Demand (CID Ref. CRB-2024-0417) and any anticipated formal BIPA enforcement action that may follow, including negotiations with the AG's office and Ridgeway & Falk LLP regarding the scope and timeline of MTDC's CID compliance, objections to overbroad document demands, and defense of any enforcement complaint or consent decree proceeding;
(b) Defense of the employee class action (Cook County Case No. 2024-CH-04417), including all pretrial proceedings, class-certification briefing, discovery, dispositive motions, trial preparation, and, if necessary, trial and post-trial proceedings;
(c) Advice on the remediation of MTDC's biometric-data practices, including the development of BIPA-compliant consent protocols, data-retention and destruction schedules, vendor-management policies, and employee-notification procedures, to mitigate ongoing liability and demonstrate good faith in connection with settlement negotiations or consent-decree compliance;
(d) Potential cross-claims and indemnification proceedings against MTDC's technology vendors, including and specifically Pinnacle Workforce Analytics, Inc., under the Master Software License and Services Agreement ("MSLA") dated June 15, 2021. The MSLA has a five-year initial term (June 15, 2021 through June 14, 2026) with an optional three-year renewal, and a total contract value of $8,700,000 ($1,740,000 per year). MTDC's General Counsel has indicated that the MSLA contains an indemnification provision (Section 14.2) requiring Pinnacle to indemnify MTDC for losses arising from the platform's failure to comply with applicable law. MTDC intends to enforce this provision aggressively; and
(e) Related employment counseling concerning MTDC's workforce-monitoring policies, including advice on the intersection of BIPA requirements with collective bargaining obligations under MTDC's agreements with the Amalgamated Transit Union Local 241 and Local 308.
D. Proposed Engagement Team and Financial Parameters
If the engagement were to proceed — which this memorandum recommends against — the proposed engagement team and financial parameters are as follows:
•  Responsible Partner: Rachel Bernstein, Partner, Privacy & Data Security, Chicago office (One North Wacker Drive, Suite 4200, Chicago, Illinois 60606)
•  Billing Partner: Miriam Calloway, Partner, Healthcare & Life Sciences, Chicago office
•  Lead Associate: Devon Archer, Senior Associate, Labor & Employment, Chicago office
•  Working Associate: Nadia Petrov, Associate, Labor & Employment, Chicago office
•  Proposed hourly rates: Partner: $1,150/hr; Senior Associate: $785/hr; Junior Associate: $625/hr
•  Estimated fees for proposed engagement: $3,500,000–$5,200,000 over approximately 18–24 months, depending on the trajectory of both the AG enforcement proceedings and the class-action litigation, including the possibility of trial
These financial estimates were prepared by Rachel Bernstein in consultation with the Firm's Pricing & Legal Project Management group and are based on comparable BIPA defense engagements handled by the Firm's Chicago office in the 2021–2023 period.
IV. Description of the Existing Pinnacle Engagement (Matter No. 1031-00001)
A. The Existing Client
Pinnacle Workforce Analytics, Inc. is a Delaware corporation with its registered agent at Cobalt Ridge Technologies, 1209 Orange Street, Wilmington, Delaware 19801. The company is headquartered at 11900 Sunrise Valley Drive, Suite 500, Reston, Virginia 20191.
Pinnacle develops, licenses, and supports biometric workforce-management software for enterprise and public-sector clients. Its flagship product is "TruScan 360," an AI-powered timekeeping, attendance, and workforce-scheduling platform that uses a suite of biometric identifiers — including fingerprint recognition, facial-geometry mapping, and iris-scan data — to authenticate employee identity, record time-and-attendance events, and generate workforce-optimization analytics.
Pinnacle's annual revenues are approximately $485 million, derived from software licensing fees, implementation services, and ongoing support and maintenance contracts. TruScan 360 is deployed by more than 340 enterprise clients across the United States, including public transit authorities, hospital systems, manufacturing facilities, and distribution centers. The company's EIN is 54-2198437.
The following individuals have been identified as key Pinnacle personnel for purposes of this conflicts analysis:
•  Chief Executive Officer: Gregory Harmon
•  General Counsel: Sandra Yee
B. Nature and Scope of the Existing Representation
Calderwood & Harkness has represented Pinnacle since 2019 in a series of patent-licensing, counseling, and enforcement matters related to the core biometric-recognition algorithms that power TruScan 360. The relationship originated with a patent-portfolio counseling engagement (Matter No. 1031-00001, now closed) and expanded into an active enforcement campaign beginning in 2021.
The currently active matter is Matter No. 1031-00001, opened March 14, 2022, and styled Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., U.S. District Court for the Eastern District of Virginia, Case No. 1:22-cv-01533, filed September 6, 2022. In this action, Pinnacle asserts patent-infringement claims against Veritas Biometrics Corp. ("Veritas"), a direct competitor located at 8200 Greensboro Drive, Suite 1100, McLean, Virginia 22102, whose CEO is Randall Cho. Veritas is represented by Whitmore & Sato LLP, 999 Waterside Drive, Suite 600, Norfolk, Virginia 23510, with lead partner Akira Sato.
The patent-infringement claims center on three utility patents — U.S. Patent Nos. 10,XXX,412; 10,XXX,978; and 11,XXX,301 — that cover TruScan 360's proprietary biometric-matching algorithms, multi-modal biometric fusion methodology, and adaptive-threshold calibration system. The litigation is currently in the expert-discovery phase, with a Markman hearing completed on February 16, 2024, and trial scheduled for January 13, 2025.
The Pinnacle engagement is staffed as follows:
•  Responsible & Billing Partner: Jonathan Mercer, Partner, intellectual Property / Patent Litigation, Washington, D.C. office
•  Lead Associate: Priya Subramaniam, Senior Associate, intellectual Property, Washington, D.C. office
The Firm's FY 2023 actual billings from the Pinnacle engagement totaled $2,137,500, based on Firm billing records for Matter No. 1031-00001. This figure reflects the increased activity associated with the Markman hearing preparation and the commencement of expert discovery. The Firm projects FY 2024 billings from Pinnacle to be in the range of $2,400,000–$2,800,000, given the upcoming trial preparation and trial.
C. Confidential Information in the Firm's Possession
Per Jonathan Mercer's confirmation in his internal email of May 10, 2024, the Firm possesses extensive Pinnacle confidential information that is directly relevant to TruScan 360's biometric data-collection, processing, storage, and dissemination practices. This confidential information includes, but is not limited to:
•  Technical specifications for the TruScan 360 platform, including hardware interface requirements, software architecture documentation, and system integration protocols;
•  Source-code architecture summaries describing the structure and logic of TruScan 360's biometric-matching algorithms;
•  Data-flow diagrams illustrating how biometric identifiers and biometric information are collected, transmitted, processed, stored, and (where applicable) shared with third-party systems;
•  Biometric-data retention policies, including Pinnacle's internal guidelines for data retention periods, data-destruction protocols, and data-backup procedures;
•  Algorithm design documents describing the mathematical models and machine-learning methodologies employed by TruScan 360's facial-geometry, fingerprint, and iris-scan recognition systems; and
•  Patent-prosecution correspondence with the United States Patent and Trademark Office, including inventor declarations, claim amendments, and prosecution-history estoppel arguments.
This information was provided to the Firm under the protection of the attorney-client privilege and Pinnacle's proprietary and trade-secret protections, and was necessary for the Firm's prosecution of Pinnacle's patent-infringement claims against Veritas. Critically, this information bears directly on the data-collection, storage, and dissemination practices at issue in the proposed MTDC engagement. A lawyer representing MTDC in BIPA proceedings arising from TruScan 360 would have a direct and substantial interest in obtaining precisely the type of technical and policy information that the Firm already possesses as Pinnacle's counsel.
D. The Pinnacle–MTDC Relationship
The factual nexus between the existing Pinnacle engagement and the proposed MTDC engagement is not limited to the shared technology platform. Pinnacle and MTDC have a direct contractual relationship that is central to the proposed MTDC representation.
Pinnacle sold and deployed TruScan 360 to MTDC under the Master Software License and Services Agreement ("MSLA") dated June 15, 2021. The MSLA provides for a five-year initial term (June 15, 2021 through June 14, 2026) with an optional three-year renewal at MTDC's election. The total contract value over the five-year initial term is $8,700,000, or $1,740,000 per year. The MSLA includes provisions for software licensing, platform customization, implementation services, ongoing technical support and maintenance, and software updates and upgrades. Importantly, as noted above, the MSLA contains an indemnification provision (Section 14.2) under which Pinnacle agreed to indemnify, defend, and hold harmless MTDC from and against losses, claims, damages, and expenses arising from the platform's failure to comply with applicable federal, state, or local law.
The Attorney General's CID (Ref. CRB-2024-0417) names Pinnacle as a "responsible party" in connection with the alleged BIPA violations at MTDC. The AG has indicated that Pinnacle may be named as a co-respondent in any formal enforcement action. MTDC's anticipated litigation strategy — as communicated by MTDC General Counsel Terrence Whitfield during the May 6, 2024 call with Rachel Bernstein — expressly includes cross-claims and indemnification demands against Pinnacle under Section 14.2 of the MSLA. It is MTDC's position that Pinnacle, as the designer, developer, and deployer of TruScan 360, bears primary responsibility for the platform's alleged BIPA non-compliance and should bear the costs and consequences of any resulting enforcement action, class-action liability, or remediation.
In short, the proposed MTDC engagement would require Calderwood & Harkness to take direct legal action against its existing client Pinnacle in the very area of technology — TruScan 360's biometric data-handling practices — in which the Firm currently represents Pinnacle's interests.
V. Conflicts Analysis Under the Illinois Rules of Professional Conduct
The proposed MTDC engagement is subject to the Illinois Rules of Professional Conduct, which govern the Firm's Chicago-office lawyers who would staff the engagement and which apply to the matters at issue in Illinois. The analysis below also considers the ABA Model Rules of Professional Conduct and relevant Illinois case law and ethics opinions, though the Illinois Rules are the primary governing authority.
A. Illinois Rule 1.7(a)(1) — Direct Adversity
Applicable Rule. Illinois Rule of Professional Conduct 1.7(a)(1) provides that, except as provided in paragraph (b), a lawyer shall not represent a client if the representation of that client will be directly adverse to another client. The rule applies regardless of whether the two representations are related and regardless of whether the matters are pending before the same tribunal. See Ill. R. Prof'l Conduct 1.7, cmt. [6] ("a directly adverse conflict may arise when a lawyer is asked to represent the seller of a business in negotiations against a buyer represented by the lawyer, not in the same transaction but in another, unrelated matter"); Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1321 (7th Cir. 1978) (applying direct-adversity prohibition where firm's concurrent representations involved the same industry and overlapping factual issues).
Analysis. The proposed MTDC engagement would require Calderwood & Harkness to take the following actions, each of which is directly adverse to the Firm's existing client Pinnacle:
First, the Firm would be required to defend MTDC against BIPA claims arising specifically from the deployment of Pinnacle's TruScan 360 platform. The defense of MTDC would necessarily require detailed analysis, characterization, and likely criticism of TruScan 360's biometric data-collection, storage, retention, and dissemination practices. An effective defense of MTDC would require the Firm to demonstrate that MTDC reasonably relied on Pinnacle's representations about TruScan 360's legal compliance, that Pinnacle controlled the platform's data-handling architecture, and that any BIPA violations were attributable to Pinnacle's design and deployment decisions rather than MTDC's operational choices. This strategy directly harms Pinnacle's interests by attributing BIPA liability to Pinnacle and characterizing Pinnacle's technology as non-compliant with applicable privacy law.
Second, the Firm would be required to pursue cross-claims and indemnification demands against Pinnacle under Section 14.2 of the MSLA. This is the most explicit form of direct adversity: the Firm would be asserting affirmative legal claims on behalf of one client (MTDC) directly against another current client (Pinnacle). The cross-claims would seek to recover from Pinnacle some or all of MTDC's defense costs, settlement payments, and damages liability — potentially amounting to tens of millions of dollars.
Third, the Firm would be required to characterize TruScan 360's biometric-data collection, storage, and dissemination practices as unlawful under BIPA and the Illinois Personal Information Protection Act in order to build a factual and legal foundation for MTDC's indemnification claims against Pinnacle. Characterizing a client's flagship product as an instrument of unlawful surveillance is about as directly adverse to that client's interests as legal advocacy can be.
Direct adversity is not negated by the fact that the matters are in different forums. The Pinnacle patent-enforcement litigation is pending in the Eastern District of Virginia, while the MTDC proceedings are in Cook County and before the Illinois Attorney General. However, Illinois Rule 1.7(a)(1) does not limit the direct-adversity prohibition to same-tribunal conflicts. The prohibition extends to any situation in which one representation is directly adverse to another client, regardless of the tribunals involved. See Ill. R. Prof'l Conduct 1.7, cmt. [6]; Fiduciary Duty, Inc. v. Parker, 2014 IL App (1st) 132269, ¶ 42 (finding direct adversity where concurrent representations involved different proceedings and different subject matter).
Direct adversity is heightened by the AG's identification of Pinnacle as a responsible party. The fact that the Illinois Attorney General has already designated Pinnacle as a "responsible party" in the CID and has indicated the possibility of naming Pinnacle as a co-respondent in enforcement proceedings means that the adversity between MTDC's interests and Pinnacle's interests is not merely theoretical or contingent. It is current, concrete, and escalating.
Conclusion. A concurrent-client conflict of interest exists under Illinois Rule of Professional Conduct 1.7(a)(1). The proposed MTDC representation would be directly adverse to the Firm's existing client Pinnacle.
B. Illinois Rule 1.7(a)(2) — Material Limitation
Applicable Rule. Illinois Rule of Professional Conduct 1.7(a)(2) provides that 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, a former client, or a third person, or by a personal interest of the lawyer. This rule encompasses situations where, even absent direct adversity in the litigation sense, the lawyer's duty of loyalty, duty of confidentiality, or duty of vigorous advocacy to one client creates a significant risk that the lawyer's professional judgment on behalf of another client will be compromised.
Analysis. The material-limitation conflict in this case is severe and multifaceted.
Diametrically opposed legal positions regarding TruScan 360. The Pinnacle patent-enforcement litigation (Matter No. 1031-00001) depends fundamentally on establishing the legitimacy, innovation, and commercial value of TruScan 360's biometric capabilities. The Firm's role in that litigation is to champion TruScan 360 as a cutting-edge, patentable, and commercially significant biometric platform — to persuade the court that TruScan 360's biometric-matching algorithms, multi-modal fusion methodology, and adaptive-threshold calibration system represent genuine innovation worthy of patent protection and enforcement. The proposed MTDC engagement would require the Firm to take the opposite position: that TruScan 360's biometric data-collection and processing capabilities constitute unlawful biometric-data practices in violation of BIPA and related privacy statutes. These positions are not merely "positionally inconsistent in unrelated matters" — they involve the identical technology platform, overlapping factual questions regarding TruScan 360's data-collection and retention practices, and require the Firm to develop contradictory factual narratives about the same product.
Compromise of the duty of loyalty. The Firm owes Pinnacle an undivided duty of loyalty in connection with the patent-enforcement litigation. That duty requires the Firm to advocate vigorously and single-mindedly for Pinnacle's interests, including the interest in maintaining TruScan 360's reputation as a lawful, innovative, and commercially valuable product. If the Firm were simultaneously representing MTDC in BIPA proceedings arising from TruScan 360, the Firm would face a constant and irreconcilable tension between its duty to advance Pinnacle's interests and its duty to advance MTDC's interests.
Compromise of the duty of confidentiality. As described in Section IV.C above, the Firm possesses extensive Pinnacle confidential information regarding TruScan 360's technical architecture, data-handling practices, and patent-prosecution history. This information is directly relevant to the proposed MTDC engagement. The Firm's lawyers representing MTDC would have a professional obligation to investigate and develop the factual record regarding TruScan 360's biometric data practices — the very subject matter about which the Firm already possesses Pinnacle's confidential information. Even if the Firm could construct an ethical wall to prevent formal disclosure of Pinnacle's confidential information to the MTDC engagement team, the mere existence of that information within the Firm creates an intolerable risk that the Firm's advocacy for MTDC would be either enhanced by (or constrained to avoid the appearance of using) Pinnacle's confidential information. Either outcome constitutes a material limitation on the Firm's ability to represent one or both clients competently and diligently.
Compromise of the Firm's advocacy for MTDC. The material-limitation analysis runs in both directions. If the Firm were representing MTDC, the Firm's advocacy on MTDC's behalf would be materially limited by the Firm's concurrent obligations to Pinnacle. The Firm would be unable to take the most aggressive litigation positions against Pinnacle's technology, to pursue the most favorable indemnification arguments on MTDC's behalf, or to characterize Pinnacle's conduct in the most damaging light — because doing so would directly harm another client of the Firm and violate the duty of loyalty owed to that client. MTDC would be entitled to expect its lawyers to pursue every available avenue of defense and every meritorious claim against responsible parties, including Pinnacle. The Firm's divided loyalties would prevent it from meeting that expectation.
Conclusion. A material-limitation conflict of interest exists under Illinois Rule of Professional Conduct 1.7(a)(2). The Firm's responsibilities to Pinnacle would materially limit its ability to represent MTDC competently and diligently, and vice versa.
C. Illinois Rule 1.7(b) — Waivability / Consent Analysis
Applicable Rule. Illinois Rule of Professional Conduct 1.7(b) provides that, 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;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
All four prongs must be satisfied for consent to cure a conflict. The analysis below addresses each prong.
Prong 1 — Reasonable belief of competent and diligent representation. This prong imposes an objective standard: it is not sufficient that the lawyer subjectively believes he or she can provide competent representation; the belief must be one that a disinterested lawyer would find objectively reasonable. See Ill. R. Prof'l Conduct 1.7, cmt. [15] ("the mere willingness of the lawyer or the clients to consent is not dispositive").
No reasonable lawyer could conclude that the Firm can simultaneously: (i) argue in the Eastern District of Virginia that TruScan 360 is a legitimate, innovative, and commercially valuable biometric platform deserving of patent protection and enforcement against competitors (for Pinnacle); while (ii) arguing in Cook County and before the Illinois Attorney General that the same platform's biometric-data practices are unlawful under BIPA and PIPA (for MTDC); while (iii) pursuing cross-claims and indemnification demands against Pinnacle on behalf of MTDC, seeking to recover potentially tens of millions of dollars from Pinnacle based on the very technology the Firm is championing in the patent case.
The legal positions are not merely "positionally inconsistent in unrelated matters" — a circumstance that might, in limited cases, be waivable. Rather, they involve the identical technology platform, overlapping and identical factual questions regarding TruScan 360's data-collection, processing, retention, and dissemination practices, and the Firm's possession of Pinnacle's confidential technical information that is directly relevant to the MTDC claims. The inconsistency is not abstract or theoretical; it is concrete, operational, and present in virtually every aspect of both engagements. A disinterested lawyer reviewing the circumstances would conclude that it is not possible for the Firm to provide competent and diligent representation to both MTDC and Pinnacle simultaneously.
Accordingly, Prong 1 is not satisfied. The conflict cannot be cured by consent on this ground alone.
Prong 2 — Not prohibited by law. There is no specific statute or regulation that would prohibit the dual representation. This prong is likely satisfied, though it does not affect the overall analysis given the failure of Prongs 1 and 3.
Prong 3 — No assertion of a claim by one client against another in the same litigation or proceeding. Although the existing Pinnacle patent litigation and the proposed MTDC proceedings are currently pending in different tribunals (E.D. Va. vs. Cook County and the Illinois AG's office), the proposed MTDC engagement expressly contemplates the assertion of cross-claims and indemnification demands against Pinnacle. If MTDC asserts cross-claims against Pinnacle in the Cook County class action, the Firm would be asserting claims on behalf of one of its clients (MTDC) directly against another of its clients (Pinnacle) before the same tribunal — the Circuit Court of Cook County. This is precisely the scenario that Prong 3 is designed to prevent.
Moreover, there is a significant probability that the AG's enforcement action will also name Pinnacle as a co-respondent. If that occurs, MTDC and Pinnacle would be parties in the same proceeding before the same tribunal, with the Firm representing both — on opposing sides.
Prong 3 independently bars consent. The conflict is non-consentable on this ground.
Prong 4 — Informed consent, confirmed in writing. Even if consent were theoretically possible under Prongs 1 through 3 — which it is not — the practical mechanics of obtaining informed consent present an independent barrier. Informed consent requires that each affected client be provided with "adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct." Ill. R. Prof'l Conduct 1.0(e). To obtain Pinnacle's informed consent, the Firm would need to disclose the nature of the proposed MTDC engagement, including the fact that MTDC intends to pursue cross-claims and indemnification demands against Pinnacle. Such disclosure could compromise MTDC's litigation strategy and its interests as a prospective client. Conversely, to obtain MTDC's informed consent, the Firm would need to disclose the nature and scope of the existing Pinnacle engagement and the type of confidential information in the Firm's possession — disclosure that could compromise Pinnacle's interests.
In any event, because the conflict fails Prongs 1 and 3, consent would not cure the conflict even if both clients were willing to provide it. This is a conflict that the Rules do not permit to be waived, regardless of the sophistication or willingness of the clients.
Overall waivability conclusion. The conflict is not waivable by consent. The conflict fails Prong 1 (no reasonable belief of competent and diligent representation) and Prong 3 (assertion of claims by one client against another in the same proceeding) of the Rule 1.7(b) waivability test. Each failure is independently sufficient to render the conflict non-consentable. Together, they leave no doubt that consent cannot cure this conflict.
D. Consideration of Illinois Rule 1.9 — Former-Client Analysis (Inapplicable but Noted)
Illinois Rule of Professional Conduct 1.9 governs duties to former clients. It provides, in relevant part, that a lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client, unless the former client gives informed consent, confirmed in writing. Ill. R. Prof'l Conduct 1.9(a).
Rule 1.9 does not apply here because Pinnacle is a current, not former, client of the Firm. Matter No. 1031-00001 is active and ongoing, with trial scheduled for January 13, 2025. There has been no termination of the attorney-client relationship and no closure of the matter.
However, for completeness, and to address the hypothetical that the Conflicts Committee might consider whether the conflict could be resolved by withdrawing from the Pinnacle engagement to convert Pinnacle to a former client, the following is noted: Even if Pinnacle were a former client, the proposed MTDC engagement and the Pinnacle engagement are substantially related — both center on TruScan 360's biometric data-handling capabilities — and the Firm possesses confidential information from the Pinnacle engagement that is material to the proposed MTDC engagement. Accordingly, the conflict would also be barred under Rule 1.9(a), and consent from Pinnacle would still be required. Moreover, withdrawing from the Pinnacle engagement solely to accept the MTDC engagement would itself raise serious ethical concerns regarding the duty of loyalty and the prohibition on "dropping" a client to circumvent the concurrent-conflict rules. See Ill. R. Prof'l Conduct 1.7, cmt. [4] ("a lawyer may not drop a client in order to resolve a conflict"); Picker Int'l, Inc. v. Varian Assocs., Inc., 869 F.2d 578, 584 (Fed. Cir. 1989) (condemning the "hot potato" doctrine). This alternative is therefore not a viable path forward.
E. Consideration of Illinois Rule 1.10 — Imputation and Screening
Applicable Rule. Illinois Rule of Professional Conduct 1.10 addresses the imputation of conflicts within a law firm. In general, while a lawyer is associated with a firm, no lawyer associated in the firm shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9. Ill. R. Prof'l Conduct 1.10(a). Illinois adopted a limited screening exception in 2010, codified in Rule 1.10(e), which permits screening to avoid imputation of a conflict that arises solely from a lawyer's association with a prior firm — i.e., the lateral-hire screening exception.
Question Presented. Could the conflict be cured by erecting a formal ethical screen (sometimes called a "Chinese wall") between Jonathan Mercer and the Pinnacle engagement team, on the one hand, and Rachel Bernstein and the proposed MTDC engagement team, on the other?
Analysis. The conflict in this case does not arise from a lateral-hire situation. The conflict arises from the concurrent representation of two clients by current partners of the Firm. Jonathan Mercer has been a partner at Calderwood & Harkness since 2016 and has represented Pinnacle since 2019. The conflict is not attributable to Mercer's association with a prior firm; it is attributable to the Firm's own existing client relationship. The lateral-screening exception under Rule 1.10(e) is, by its terms, inapplicable.
Illinois has not adopted a general screening exception for concurrent-client conflicts arising within a firm. The comments to Rule 1.10 and the Illinois State Bar Association's ethics opinions confirm that screening is not available to cure a concurrent-representation conflict of the type presented here. See ISBA Advisory Op. 13-03 (2013) (screening permitted only in lateral-hire context under Rule 1.10(e); not available for concurrent-client conflicts under Rule 1.7).
Conclusion. Screening does not provide a cure for the conflict. The entire Firm is disqualified from accepting the proposed MTDC engagement for as long as the Pinnacle engagement remains active.
VI. Financial Considerations
The following financial information is provided for the Conflicts Committee's awareness. Financial considerations do not drive the ethical analysis, and the General Counsel wishes to emphasize that the recommendation to decline the proposed MTDC engagement is based solely on the ethical analysis set forth in Section V above. Nevertheless, the Committee should be aware of the financial dimensions of the decision.
Estimated foregone fees from declining the MTDC engagement. Based on the fee estimates prepared by Rachel Bernstein and the Firm's Pricing & Legal Project Management group, declining the proposed MTDC engagement would result in foregone fees in the range of $3,500,000 to $5,200,000 over approximately 18 to 24 months. This represents a significant revenue opportunity, particularly for the Firm's Chicago office and the Privacy & Data Security practice group. The engagement would also have provided an opportunity to deepen the Firm's relationship with a major public-sector client and to build precedent in an area of rapidly evolving Illinois privacy law.
Annual Pinnacle billings. The Firm's FY 2023 actual billings from Pinnacle under Matter No. 1031-00001 totaled $2,137,500. Projected FY 2024 billings are in the range of $2,400,000 to $2,800,000, reflecting the upcoming trial preparation and trial in Pinnacle v. Veritas Biometrics Corp. Beyond the immediate matter, Pinnacle has been a client of the Firm since 2019 and represents an ongoing relationship with significant potential for future engagements, including additional patent-enforcement actions, IP counseling, and potential M&A work.
Comparative analysis. The MTDC engagement would represent a larger single-matter fee opportunity than the current Pinnacle engagement. However, the Pinnacle relationship is longer-standing, involves a higher degree of institutional trust and confidential-information sharing, and has significant potential for expansion beyond the current active matter. Moreover, the reputational and disciplinary risk of accepting the MTDC engagement in the face of an unwaivable conflict far outweighs any revenue benefit.
Administrative costs. No billable time has been or will be generated in connection with this conflicts-clearance process. The Conflicts Committee review is an internal administrative matter at zero cost to any client. The time spent by the General Counsel, the Conflicts & New Business team, and the involved partners on this review is absorbed by the Firm as an overhead expense and is not charged to any client matter.
The ethical obligation to avoid unwaivable conflicts is paramount and supersedes all financial considerations. The Firm's reputation for ethical rigor and its standing before the courts and bar disciplinary authorities are institutional assets of far greater value than any individual engagement.
VII. Preliminary Recommendation
Based on the foregoing analysis, the General Counsel's preliminary recommendation is as follows:
1. The proposed MTDC engagement (Proposed Matter No. 1031-00001) should be declined.
The conflict with existing client Pinnacle Workforce Analytics, Inc. (Matter No. 1031-00001) constitutes a non-waivable concurrent-client conflict under Illinois Rules of Professional Conduct 1.7(a)(1) (direct adversity) and 1.7(a)(2) (material limitation). The waivability analysis under Rule 1.7(b) confirms that consent cannot cure the conflict because: (a) no reasonable lawyer could conclude that the Firm can provide competent and diligent representation to both MTDC and Pinnacle simultaneously (Prong 1 failure); and (b) the proposed engagement contemplates the assertion of claims by MTDC against Pinnacle, likely before the same tribunal (Prong 3 failure). Screening under Rule 1.10 is unavailable because the conflict arises from a concurrent representation by a current Firm partner, not from a lateral hire.
2. Communication of the declination to MTDC. The Firm should communicate the declination to MTDC's General Counsel, Terrence Whitfield, promptly following the Conflicts Committee's approval. The declination communication should be made in appropriately general terms, stating only that the Firm has identified a conflict of interest that prevents it from accepting the engagement. The communication should not disclose the identity of the existing client, the nature of the existing engagement, or any specifics of the conflict. The Firm's duty of confidentiality to Pinnacle precludes any such disclosure.
3. Referral to alternative counsel. The Firm should offer to facilitate a referral to qualified alternative counsel with demonstrated BIPA and biometric data-privacy expertise and no conflicts of interest with respect to the MTDC matters. Potential referral candidates include, without limitation:
•  Sanderson, Pryce & Gutierrez LLP (Chicago, IL) — nationally recognized BIPA defense practice
•  Callahan & Yun LLP (Chicago, IL) — significant public-sector privacy-law experience
•  The privacy and data-security practice groups at other Am Law 100 firms without Pinnacle relationships (to be confirmed by Colleen Farrow through a discreet inquiry)
4. Confirmation regarding Pinnacle confidential information. The Firm should confirm to the Pinnacle engagement partner, Jonathan Mercer, and to Pinnacle's General Counsel, Sandra Yee (if inquiries are made), that no Pinnacle confidential information was disclosed to any member of the proposed MTDC engagement team or to MTDC's General Counsel during the intake and conflicts-clearance process. Based on the General Counsel's review of the procedural history, no such disclosure occurred. Rachel Bernstein's initial telephone conversation with Terrence Whitfield on May 6, 2024, did not involve the exchange of any information about Pinnacle or about the Firm's existing client relationships. The conflicts-clearance process was conducted internally, and no substantive MTDC work was performed before the conflict was identified.
5. Documentation and database updates. The Conflicts & New Business team should update the Firm's conflicts database to reflect the declination of the proposed MTDC engagement, including cross-referencing MTDC as a declined prospective client associated with the Pinnacle conflict (Matter No. 1031-00001). The intake file for Proposed Matter No. 1031-00001 should be closed and retained in accordance with the Firm's records-retention policies.
VIII. Items for Conflicts Committee Discussion (May 14, 2024 Meeting)
The following items are submitted for the Conflicts Committee's discussion and consideration at its meeting scheduled for May 14, 2024:
1.  Confirmation of unwaivability determination. The Committee is requested to review and confirm the General Counsel's determination that the conflict between the proposed MTDC engagement and the existing Pinnacle engagement is unwaivable under Illinois Rules of Professional Conduct 1.7(a)(1), 1.7(a)(2), and 1.7(b). If any member of the Committee disagrees with the analysis or identifies additional considerations, those views should be raised and discussed.
2.  Approval of recommended course of action. The Committee is requested to approve the recommended course of action, which consists of: (a) declining the proposed MTDC engagement; (b) communicating the declination to MTDC's General Counsel; (c) offering to facilitate a referral to qualified alternative counsel; and (d) confirming to the Pinnacle engagement partner that no confidential information was compromised.
3.  Declination letter language. The Committee should discuss and approve appropriate language for the declination communication to MTDC. The communication must strike a careful balance between providing a sufficient explanation for the declination (to preserve the Firm's professional reputation and relationship with MTDC and the referring firm, Hargrove, Tillman & Reese LLP) and protecting Pinnacle's identity and confidential information. The General Counsel will prepare a draft declination letter for the Committee's review and will circulate it prior to or at the meeting.
4.  Conflicts database updates and cross-referencing. The Committee should confirm the steps to be taken by the Conflicts & New Business team to update the Firm's conflicts database, including: (a) recording MTDC as a declined prospective client; (b) cross-referencing the declined MTDC matter (Proposed Matter No. 1031-00001) with the existing Pinnacle matter (Matter No. 1031-00001); (c) noting the basis for the declination in the conflicts record; and (d) flagging MTDC and its key personnel for future conflicts screening in the event circumstances change (e.g., if the Pinnacle engagement concludes and the Firm is subsequently approached by MTDC on a different matter).
5.  Communication to referring firm. The Committee should consider whether any communication should be made to Constance Hargrove at Hargrove, Tillman & Reese LLP regarding the declination. As the source of the referral, Ms. Hargrove may inquire about the outcome. Any communication to Ms. Hargrove should be limited to the fact that the Firm identified a conflict and was unable to accept the engagement, with no further detail.
6.  Communication to Rachel Bernstein and engagement team. The Committee should confirm that Rachel Bernstein and the proposed engagement team (Miriam Calloway, Devon Archer, and Nadia Petrov) are informed of the declination and the reasons therefor in sufficient detail to ensure compliance with the Firm's conflicts policies, without disclosing specific Pinnacle confidential information.
7.  Any additional considerations. The Committee should address any additional considerations that members may wish to raise, including any implications for the Firm's broader BIPA practice, any lessons learned for the intake and conflicts-screening process, and any adjustments to the Firm's conflicts protocols that the Committee believes would be beneficial.
IX. Attachments
The following documents are referenced in this memorandum and are attached hereto for the Conflicts Committee's review. These attachments are subject to the same privilege and confidentiality protections as this memorandum and are not to be distributed beyond the named recipients without the prior written consent of the General Counsel.
Attachment A: Conflicts Search Report — Round 1 (issued May 10, 2024, prepared by Colleen Farrow, Director, Conflicts & New Business)
Attachment B: Supplemental Conflicts Search Report — Round 2 (issued May 13, 2024, prepared by Colleen Farrow, Director, Conflicts & New Business)
Attachment C: New-Matter Intake Request Form (C&H Form NM-1) — Proposed Matter No. 1031-00001 (submitted May 9, 2024, by Rachel Bernstein, Partner, Privacy & Data Security)
Attachment D: Internal email correspondence between Rachel Bernstein and Jonathan Mercer (May 10, 2024), including Mercer's confirmation of the scope and sensitivity of the Pinnacle engag

MEMORANDUM

FOR CONFLICTS COMMITTEE USE ONLY

Record

Parties

Dates

Amounts