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PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION

CONFLICTS COMMITTEE ANALYSIS MEMORANDUM — FINAL

Prepared By: Helen Drazkowski, General Counsel, Calderwood & Harkness LLP

Date: May 14, 2024

Re: New-Matter Intake — Matter No. 1031-00001: Proposed Representation of Metropolitan Transit Development Corp. ("MTDC") — Conflict with Existing Client Pinnacle Workforce Analytics, Inc. ("Pinnacle") — Matter No. 1031-00001

Distribution:

Lawrence Keating (Chair, Conflicts Committee) Colleen Farrow (Director, Conflicts & New Business) Rachel Bernstein (Partner, Privacy & Data Security) Jonathan Mercer (Partner, intellectual Property / Patent Litigation)

Status: FINAL — Supersedes Draft dated May 13, 2024

This memorandum was prepared at the direction of the Conflicts Committee for consideration at its meeting of May 14, 2024. It summarizes the factual background, identifies the applicable ethical rules, sets forth the General Counsel's analysis of the conflict, and provides a recommendation for the Committee's action. All factual representations herein have been verified against materials in the firm's conflicts-management system, interviews with relevant partners, and publicly available records unless otherwise noted.

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I. Executive Summary

Calderwood & Harkness LLP has been asked by Metropolitan Transit Development Corp. ("MTDC"), a unit of local government and special-purpose transit authority organized under the Illinois Local Mass Transit District Act (70 ILCS 3610/1 et seq.), headquartered at 550 West Harrison Street, Suite 1400, Chicago, IL 60607, to undertake representation in connection with five related and interrelated matters: (a) defense of a Civil Investigative Demand (Ref. CRB-2024-0417) issued by the Illinois Attorney General's Bureau of Civil Rights on April 22, 2024; (b) defense of a putative employee class action filed in the Circuit Court of Cook County, Chancery Division, captioned Johnson et al. v. Metropolitan Transit Development Corp., Case No. 2024-CH-04417, filed on April 29, 2024; (c) counseling on the remediation of MTDC's biometric-data collection, storage, and dissemination practices under the Illinois Biometric Information Privacy Act, 740 ILCS 14/1 et seq. ("BIPA"); (d) prosecution of potential cross-claims and indemnification proceedings against technology vendors, including Pinnacle Workforce Analytics, Inc. ("Pinnacle"); and (e) related employment counseling concerning workforce-monitoring policies and procedures.

The proposed matter was opened as Matter No. 1031-00001 on May 9, 2024, with Rachel Bernstein designated as responsible partner. Pursuant to firm policy, a conflicts search was initiated contemporaneously with the new-matter intake request.

The conflicts search identified that the firm currently represents Pinnacle Workforce Analytics, Inc., a Delaware corporation headquartered at 11900 Sunrise Valley Drive, Suite 500, Reston, Virginia 20191, under Matter No. 1031-00001. That matter involves patent-enforcement litigation concerning Pinnacle's TruScan 360 biometric workforce-management platform — the same platform that is the central subject of the proposed MTDC engagement. The patent-enforcement matter, Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., Case No. 1:22-cv-01533 (E.D. Va.), was filed on September 6, 2022, and remains active and pending.

After a thorough analysis of the applicable ethical rules, the factual record, and the scope of both the existing and proposed engagements, the General Counsel concludes as follows: The conflict is unwaivable under Illinois Rules of Professional Conduct 1.7(a)(1) and 1.7(a)(2). Informed consent under Rule 1.7(b) cannot cure the conflict because no reasonable lawyer could conclude that competent and diligent representation of both MTDC and Pinnacle is possible, and because the proposed engagement contemplates the assertion of claims by one client against the other, which Rule 1.7(b)(3) categorically prohibits. The firm must decline the proposed MTDC engagement.

The estimated foregone fees associated with declining the proposed MTDC engagement range from approximately $3.5 million to $5.2 million over an anticipated 18- to 24-month engagement period. While financially significant, this consideration does not alter the ethical analysis and is documented solely for the Committee's complete understanding of the matter's dimensions.

II. Background

A. The Prospective Client — Metropolitan Transit Development Corp.

Metropolitan Transit Development Corp. ("MTDC") is a unit of local government and special-purpose transit authority established under the Illinois Local Mass Transit District Act, 70 ILCS 3610/1 et seq. MTDC is headquartered at 550 West Harrison Street, Suite 1400, Chicago, IL 60607. As a governmental body, MTDC is organized pursuant to enabling legislation and is governed by a board of directors appointed by the Governor of Illinois with the advice and consent of the Illinois Senate.

MTDC operates bus, commuter rail, and paratransit services across Cook County and five collar counties (DuPage, Kane, Lake, McHenry, and Will), serving a combined metropolitan population of approximately 8.6 million residents. MTDC reports that it serves approximately 1.6 million daily riders across its consolidated service network. The authority's annual operating budget is approximately $3.2 billion, funded through a combination of farebox revenue, federal formula grants under 49 U.S.C. § 5307, a dedicated 1.0% regional sales tax authorized by the Regional Transportation Authority Act, and direct appropriations from the State of Illinois.

The following individuals hold key leadership positions at MTDC:

• Executive Director: Darnell Okafor

• General Counsel: Terrence Whitfield

• Chief Information Security Officer: Lucia Marchetti

MTDC's Employer Identification Number is 36-6041928.

MTDC's annual outside-counsel budget across all matters is approximately $14.8 million, as represented by Terrence Whitfield during his initial discussions with Rachel Bernstein. MTDC's existing outside litigation counsel is Hargrove, Tillman & Reese LLP, located at 233 South Wacker Drive, Suite 5600, Chicago, IL 60606, with Constance Hargrove serving as the lead relationship partner. It was Hargrove, Tillman & Reese that referred MTDC to Calderwood & Harkness specifically for data-privacy and biometric-law expertise, recognizing the specialized nature of the BIPA-related matters at issue.

MTDC's fiscal agent and bond trustee for outstanding transit revenue bonds is Meridian Trust National Bank, with Angela Tran serving as Chief Fiduciary Officer. This relationship is relevant to the present analysis because material BIPA liability could trigger reporting obligations under MTDC's Continuing Disclosure Agreement, executed pursuant to SEC Rule 15c2-12, as well as certain financial covenants contained in the bond indenture governing MTDC's outstanding Series 2019A and Series 2022B transit revenue bonds.

MTDC's consulting actuary, Lakefront Actuarial Advisors, LLC (Principal: Felix Drummond, FSA, MAAA), has performed an initial exposure analysis and estimated MTDC's aggregate BIPA statutory-damages exposure at between $12.4 million and $62.0 million. The low end of that range assumes negligent-violation damages of $1,000 per violation applied to an estimated class of 12,400 current and former employees (12,400 × $1,000 = $12,400,000). The high end assumes intentional-violation damages of $5,000 per violation applied to the same class (12,400 × $5,000 = $62,000,000). These figures do not account for potential penalties in the anticipated Attorney General enforcement action, attorneys' fees, or costs of remediation.

B. The Proposed Engagement — Matter No. 1031-00001

The initial contact from MTDC was made on May 6, 2024, when Terrence Whitfield, MTDC's General Counsel, called Rachel Bernstein at the firm's Chicago office to discuss the possibility of retaining Calderwood & Harkness for the BIPA-related matters described below. Bernstein and Whitfield had a preliminary conversation of approximately forty-five minutes, during which Whitfield described the general nature of the legal exposure and the pending proceedings. No confidential or privileged information was exchanged during this initial call beyond what was necessary to evaluate the potential engagement, consistent with firm intake protocols.

On May 9, 2024, Rachel Bernstein submitted a New-Matter Intake Request Form (C&H Form NM-1) along with a Conflicts Search Request Memorandum to Colleen Farrow, Director of Conflicts & New Business. The proposed matter was assigned Matter No. 1031-00001 on that same date.

The proposed engagement team is as follows:

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

• Billing Partner: Miriam Calloway (Partner, Healthcare & Life Sciences)

• Lead Associate: Devon Archer (Associate, Labor & Employment)

• Working Associate: Nadia Petrov (Associate, Labor & Employment)

The proposed hourly rates for the engagement are: $1,150 per hour for partner-level work (reflecting Bernstein's standard government-entity rate); $785 per hour for senior associate work (Archer); and $625 per hour for junior associate work (Petrov). Based on an estimated 18- to 24-month engagement duration and the anticipated complexity of the matters described below, total estimated fees are between $3.5 million and $5.2 million.

The proposed scope of the engagement encompasses the following five interrelated work streams:

(a) Defense of the Attorney General's Civil Investigative Demand. On April 22, 2024, the Illinois Attorney General's Bureau of Civil Rights issued a Civil Investigative Demand (Ref. CRB-2024-0417) to MTDC, directed by Deputy Attorney General for Civil Rights Malcolm Jeffries. The CID seeks extensive documentation concerning MTDC's deployment of biometric workforce-management technology, including the TruScan 360 platform provided by Pinnacle. The CID also names Pinnacle as a "responsible party" in connection with the matters under investigation. The AG's office has retained outside special counsel Ridgeway & Falk LLP (401 East Adams Street, Suite 300, Springfield, IL 62701; lead partner: Diane Falk) to assist in the investigation. Based on informal communications between Ridgeway & Falk and MTDC's existing counsel, it is anticipated that the AG may file a formal BIPA enforcement action against MTDC, and potentially against Pinnacle as a co-respondent, if the CID response is deemed unsatisfactory.

(b) Defense of the Putative Employee Class Action. On April 29, 2024, a putative class action was filed in the Circuit Court of Cook County, Chancery Division, captioned Johnson et al. v. Metropolitan Transit Development Corp., Case No. 2024-CH-04417. The complaint was filed on behalf of approximately 12,400 current and former MTDC employees who allege that MTDC collected, stored, and disseminated their biometric identifiers and biometric information — including fingerprints, facial-geometry scans, and iris scans — in violation of BIPA, 740 ILCS 14/15(a), (b), (c), (d), and (e). Plaintiffs' class counsel is Kessler, Brandt & O'Neill LLP (120 North LaSalle Street, Suite 2200, Chicago, IL 60602), with Martin Kessler serving as lead class counsel and Yolanda Brandt as co-counsel. The complaint alleges that MTDC implemented the TruScan 360 system without obtaining the requisite written informed consent, without publishing a publicly available retention schedule and guidelines for destruction of biometric data, and without implementing adequate safeguards against unauthorized dissemination.

(c) BIPA Remediation Counseling. The proposed engagement would include advising MTDC on the remediation of its biometric-data collection, storage, and dissemination practices to achieve compliance with BIPA and the Illinois Personal Information Protection Act, 815 ILCS 530/1 et seq. This would involve a comprehensive review of the TruScan 360 platform's data-handling architecture, the development of compliant consent protocols, the establishment of biometric-data retention and destruction schedules, and the implementation of technical and administrative safeguards.

(d) Cross-Claims and Indemnification Proceedings Against Technology Vendors. The proposed engagement scope expressly includes the investigation, preparation, and prosecution of potential cross-claims and indemnification demands against technology vendors, including and specifically Pinnacle Workforce Analytics, Inc. These claims would be asserted under the Master Software License and Services Agreement ("MSLA") between MTDC and Pinnacle, dated June 15, 2021. The MSLA has a total contract value of $8,700,000 over a five-year initial term (i.e., $1,740,000 per year), with an optional three-year renewal, and a term running from June 15, 2021 through June 14, 2026. The MSLA contains indemnification provisions (Section 9.2), limitation-of-liability clauses (Section 10.1), and representations and warranties concerning legal compliance (Section 7.3) that would be central to any cross-claim or indemnification proceeding. MTDC's position, as communicated by Whitfield, is that Pinnacle bore primary responsibility for ensuring TruScan 360's compliance with applicable biometric-data privacy laws and that Pinnacle's failure to design the platform for BIPA compliance constitutes a material breach of the MSLA and triggers Pinnacle's indemnification obligations.

(e) Related Employment Counseling. The proposed engagement would also encompass advice on MTDC's workforce-monitoring policies, including the development of revised timekeeping and scheduling protocols that do not rely on biometric identification, or that implement biometric identification in a BIPA-compliant manner. This work stream would interface with MTDC's human resources and labor-relations functions and would address collective-bargaining implications, if any, of changes to workforce-monitoring practices.

C. The Existing Client — Pinnacle Workforce Analytics, Inc.

Pinnacle Workforce Analytics, Inc. ("Pinnacle") is a Delaware corporation with its registered agent at Cobalt Ridge Technologies, 1209 Orange Street, Wilmington, DE 19801. Pinnacle's principal place of business is located at 11900 Sunrise Valley Drive, Suite 500, Reston, VA 20191. Pinnacle's Employer Identification Number is 54-2198437.

Pinnacle develops and licenses biometric workforce-management software. Its flagship product is "TruScan 360," an AI-powered timekeeping and scheduling platform that utilizes fingerprint, facial-geometry, and iris-scan data to authenticate employee identity for purposes of time-and-attendance tracking, facility access management, and workforce scheduling. TruScan 360 is deployed by over 200 enterprise and governmental customers across the United States, according to Pinnacle's publicly available marketing materials. Pinnacle reports annual revenues of approximately $485 million.

The following individuals hold key leadership positions at Pinnacle:

• Chief Executive Officer: Gregory Harmon

• General Counsel: Sandra Yee

Pinnacle sold and deployed TruScan 360 to MTDC under the MSLA dated June 15, 2021, as described in Section II.B above. Calderwood & Harkness has represented Pinnacle since 2019 in various patent-licensing and enforcement matters related to TruScan 360's core biometric-recognition algorithms. The relationship between the firm and Pinnacle is well-established and has involved the exchange of highly sensitive technical and commercial information over a multi-year period.

D. The Existing Calderwood & Harkness Engagement — Matter No. 1031-00001

Matter No. 1031-00001 was opened on March 14, 2022. The responsible and billing partner for the matter is Jonathan Mercer (Partner, intellectual Property / Patent Litigation). The lead associate assigned to the matter is Priya Subramaniam (Associate, intellectual Property).

The nature of the engagement is patent-infringement litigation. Pinnacle, as plaintiff, has asserted claims of patent infringement against Veritas Biometrics Corp. ("Veritas"), a Delaware corporation headquartered at 8200 Greensboro Drive, Suite 1100, McLean, VA 22102, with Randall Cho serving as CEO. The action, Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., was filed on September 6, 2022, in the United States District Court for the Eastern District of Virginia, and is docketed as Case No. 1:22-cv-01533. Veritas is represented in the litigation by Whitmore & Sato LLP (999 Waterside Drive, Suite 600, Norfolk, VA 23510; lead partner: Akira Sato).

The patent-enforcement action involves three utility patents covering TruScan 360's core biometric-recognition algorithms, specifically U.S. Patent Nos. 10,XXX,XXX, 10,XXX,XXX, and 11,XXX,XXX. Pinnacle alleges that Veritas's competing biometric workforce-management product infringes these patents. The litigation has involved extensive discovery, including the production and review of TruScan 360's technical specifications, source-code architecture summaries, data-flow diagrams, algorithm design documents, and patent-prosecution correspondence. The firm's litigation team, led by Mercer and Subramaniam, has developed deep familiarity with TruScan 360's internal architecture and the technical details of its biometric-data processing capabilities.

The matter is critical to the point that must be emphasized: the patent matter concerns the same TruScan 360 biometric platform that is at the center of the proposed MTDC engagement. The factual overlap between the two matters is not incidental or tangential; it is complete and fundamental.

Actual billings from Pinnacle for fiscal year 2023, attributable to Matter No. 1031-00001, were $2,137,500. The matter remains active and ongoing, with discovery scheduled to close on September 30, 2024, and trial currently set for March 2025 on the court's docket.

E. Procedural History of the Conflicts Review

The conflicts review followed the firm's standard intake and review procedures, as outlined below:

May 9, 2024: Rachel Bernstein submitted the New-Matter Intake Request Form (C&H Form NM-1) and a Conflicts Search Request Memorandum to Colleen Farrow, Director of Conflicts & New Business. The submission identified MTDC as the prospective client, described the general nature of the proposed engagement (BIPA defense and remediation counseling), and listed the key adverse and interested parties known at that time, including the Illinois Attorney General's Bureau of Civil Rights, the named plaintiffs in the class action, and technology vendors identified in the MTDC materials, including Pinnacle Workforce Analytics, Inc.

May 9, 2024: The Conflicts & New Business team initiated Conflicts Search Round 1, running the prospective client and all identified parties through the firm's IntegrityCheck conflicts-management database.

May 10, 2024: The Conflicts Search Report (Round 1) was issued. The search identified a direct match for Pinnacle Workforce Analytics, Inc. under Matter No. 1031-00001 (Responsible Partner: Jonathan Mercer; Nature of Matter: Patent Enforcement — TruScan 360 Biometric Platform). The report flagged both a direct-adversity issue under Illinois Rule of Professional Conduct 1.7(a)(1) and a material-limitation issue under Rule 1.7(a)(2). No other conflicts were identified in Round 1 beyond the Pinnacle matter.

May 10, 2024: Rachel Bernstein emailed Jonathan Mercer to notify him of the potential conflict and to request his assessment of the scope and sensitivity of the Pinnacle engagement. Mercer responded the same day, confirming the active and ongoing nature of the Pinnacle representation, the centrality of TruScan 360 to the patent litigation, and the extensive confidential technical information in the firm's possession. Mercer expressed concern that the proposed MTDC engagement would create a direct adversity to Pinnacle and noted that the firm's position in the patent case requires it to champion TruScan 360 as a lawful and innovative technology — a position fundamentally inconsistent with the anticipated arguments in the MTDC matter.

May 13, 2024: The Supplemental Conflicts Search Report (Round 2) was issued. This expanded search included Pinnacle's corporate affiliates and subsidiaries, known subcontractors involved in TruScan 360's deployment, current and former MTDC board members, Veritas Biometrics Corp. (the defendant in the existing Pinnacle patent case), and Lakefront Actuarial Advisors, LLC. The Round 2 report confirmed that no additional conflicts exist beyond the Pinnacle issue previously identified. Specifically, the firm does not represent and has not represented Veritas Biometrics Corp., any MTDC board member in an individual capacity, Lakefront Actuarial Advisors, Kessler Brandt & O'Neill (plaintiffs' class counsel), or Ridgeway & Falk (the AG's outside special counsel).

May 13, 2024: Rachel Bernstein formally escalated the conflict to the Conflicts Committee by email to Lawrence Keating (Chair), with copies to Helen Drazkowski (General Counsel) and Colleen Farrow (Director, Conflicts & New Business). The escalation email included a detailed summary of the proposed engagement, the conflicts search results, Mercer's assessment, and Bernstein's preliminary view that the conflict was likely unwaivable.

May 13, 2024: A draft analysis memorandum was prepared by Helen Drazkowski and circulated to the Committee members and to Bernstein and Mercer for factual verification.

May 14, 2024: This Final analysis memorandum was prepared, incorporating corrections and additional detail received from Bernstein and Mercer. The Conflicts Committee meeting is scheduled for later today, May 14, 2024.

III. Conflicts Analysis

A. Applicable Ethical Framework

The Illinois Rules of Professional Conduct govern this analysis. Illinois is the controlling jurisdiction because: (i) the proposed engagement would be handled principally from the firm's Chicago office (One North Wacker Drive, Suite 4200, Chicago, IL 60606); (ii) MTDC is an Illinois governmental entity established under Illinois law; (iii) the underlying proceedings — both the Attorney General's CID and enforcement investigation and the putative class action — are pending before Illinois state authorities and in the Circuit Court of Cook County; and (iv) the BIPA and related statutes at issue are Illinois statutes. Although the existing Pinnacle matter is pending in the U.S. District Court for the Eastern District of Virginia, the conflict arises in connection with the proposed new engagement, which is anchored in Illinois.

The following rules are directly applicable:

Rule 1.7(a)(1) — Direct Adversity. A lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if the representation of one client will be directly adverse to another client. Direct adversity exists when a lawyer's actions on behalf of one client will injure, prejudice, or harm the interests of another current client.

Rule 1.7(a)(2) — Material Limitation. A concurrent conflict of interest also exists where 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 standard is broader than the direct-adversity standard and captures situations where, even absent head-to-head opposition, the lawyer's duties to one client may constrain or inhibit the lawyer's ability to act vigorously on behalf of another.

Rule 1.7(b) — Waivability by Informed Consent. Notwithstanding a concurrent conflict of interest under Rule 1.7(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.

Rule 1.9 — Duties to Former Clients. While not directly applicable because Pinnacle is a current client, Rule 1.9 is addressed for completeness. Under Rule 1.9(a), a lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related 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.

Rule 1.10 — Imputation of Conflicts. Under Rule 1.10(a), while lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so under Rules 1.7 or 1.9. Rule 1.10(d) provides a limited screening exception for personally disqualified lawyers who joined the firm by lateral transfer, but this exception does not apply to conflicts arising from ongoing representations by current partners of the firm.

The relevant statutory provisions underlying the proposed MTDC engagement are the Illinois Biometric Information Privacy Act, 740 ILCS 14/1 et seq. ("BIPA"), and the Illinois Personal Information Protection Act, 815 ILCS 530/1 et seq. ("PIPA").

B. Rule 1.7(a)(1) — Direct Adversity Analysis

The proposed MTDC engagement would be directly adverse to Pinnacle Workforce Analytics, Inc. in at least three independent and mutually reinforcing respects.

First, Pinnacle is a named responsible party in the Attorney General's CID. The Illinois Attorney General's Civil Investigative Demand (Ref. CRB-2024-0417), issued April 22, 2024, expressly names Pinnacle as a "responsible party" in connection with MTDC's deployment of TruScan 360. The CID's scope encompasses Pinnacle's role in the design, licensing, deployment, and configuration of the TruScan 360 platform's biometric-data collection and processing features. The AG's office, through outside special counsel Ridgeway & Falk LLP, has indicated that it may name Pinnacle as a co-respondent in the anticipated BIPA enforcement action if the investigation produces evidence that Pinnacle contributed to or facilitated MTDC's alleged statutory violations. Representing MTDC in responding to the CID would necessarily require the firm to develop factual narratives and legal arguments concerning Pinnacle's role in the design and deployment of TruScan 360 — arguments that could implicate Pinnacle's conduct, expose Pinnacle to additional liability, and shape the evidentiary record in a manner adverse to Pinnacle's interests. The firm cannot simultaneously defend MTDC before the AG's office and protect Pinnacle's interests; the two positions are inherently antagonistic.

Second, MTDC's anticipated cross-claims and indemnification demands against Pinnacle constitute paradigmatic direct adversity. The proposed engagement scope, as described in Section II.B(d), expressly includes the investigation, preparation, and prosecution of cross-claims and indemnification demands against technology vendors, including Pinnacle, under the MSLA dated June 15, 2021. This would require Calderwood & Harkness to assert affirmative claims — breach of contract, breach of warranty, and contractual indemnification — on behalf of MTDC directly against Pinnacle, the firm's own existing client. There is no more straightforward example of direct adversity than a law firm suing its own client on behalf of another client. The indemnification provisions of the MSLA (Section 9.2), the limitation-of-liability clauses (Section 10.1), and the compliance representations and warranties (Section 7.3) would all be at issue. The firm's intimate knowledge of Pinnacle's business, its technology, and its contractual practices — gained through the existing attorney-client relationship — would inevitably inform, consciously or unconsciously, the firm's approach to asserting claims on MTDC's behalf. This is precisely the scenario the concurrent-client conflict rules are designed to prevent.

Third, the two representations would require the firm to advance irreconcilable legal characterizations of TruScan 360. In the proposed MTDC engagement, the firm would be required to argue — before the Illinois Attorney General, the Circuit Court of Cook County, and potentially in cross-claim proceedings — that TruScan 360's biometric-data collection, storage, and dissemination practices violated BIPA (740 ILCS 14/15(a)–(e)) and the Illinois Personal Information Protection Act (815 ILCS 530/1 et seq.). The thrust of MTDC's defense and cross-claims would be that TruScan 360 was designed in a manner that made BIPA-compliant deployment difficult or impossible, that Pinnacle failed to implement adequate safeguards for biometric data, and that the platform's data-handling architecture constituted an unlawful surveillance mechanism. Simultaneously, in the patent-enforcement action (Matter No. 1031-00001, Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., E.D. Va. Case No. 1:22-cv-01533), the firm is affirmatively championing TruScan 360 as a legitimate, innovative, and commercially valuable biometric technology. The patent case requires the firm to establish the ingenuity of TruScan 360's biometric-recognition algorithms, the novelty and nonobviousness of its data-processing methods, and the platform's commercial success — arguments that necessarily presuppose the lawfulness and social value of the technology's biometric capabilities. To argue in one forum that TruScan 360 is an unlawful surveillance tool while arguing in another forum that it is a groundbreaking and legitimate technological innovation is to advance positions that are diametrically opposed and fundamentally inconsistent. While the legal standards differ between a BIPA compliance proceeding and a patent-infringement action, the factual characterizations of the platform's capabilities and data-handling practices cannot be reconciled. Opposing counsel in either matter could use the firm's arguments in the other matter to devastating effect.

Conclusion on Rule 1.7(a)(1): For each of the three independent reasons set forth above — and all the more so in combination — the proposed MTDC representation would be directly adverse to Pinnacle Workforce Analytics, Inc. A concurrent conflict of interest exists under Illinois Rule of Professional Conduct 1.7(a)(1).

C. Rule 1.7(a)(2) — Material Limitation Analysis

Even if the direct adversity identified in Section III.B did not exist — and it plainly does — a concurrent conflict of interest would independently exist under Rule 1.7(a)(2) because there is a significant risk that the firm's representation of MTDC would be materially limited by the firm's responsibilities to Pinnacle.

First, the firm possesses categories of Pinnacle confidential information that are directly relevant to the claims MTDC would assert. Through its representation of Pinnacle in Matter No. 1031-00001, the firm has obtained and reviewed extensive categories of highly sensitive, proprietary, and confidential Pinnacle information. Jonathan Mercer's team has confirmed, both in the May 10 email correspondence and in a subsequent conversation with the General Counsel on May 13, that the firm's files and the knowledge of its attorneys include, at a minimum:

(i) detailed technical specifications of TruScan 360, including hardware and software component documentation;

(ii) source-code architecture summaries and code-flow diagrams that describe the software's internal logic for biometric-data capture, encryption, and authentication;

(iii) data-flow diagrams that detail precisely how biometric data is collected from end users, processed by the TruScan 360 application layer, transmitted to Pinnacle's cloud infrastructure, stored in Pinnacle's databases, and retained or destroyed according to Pinnacle's internal policies;

(iv) Pinnacle's biometric-data retention and destruction policies, including internal policy memoranda and configuration parameters governing how long biometric templates are stored and under what conditions they are purged;

(v) algorithm design documents describing the mathematical and computational methods underlying TruScan 360's fingerprint-matching, facial-geometry analysis, and iris-recognition capabilities; and

(vi) patent-prosecution correspondence with the United States Patent and Trademark Office, including inventor declarations, prior-art analyses, and claim-construction arguments.

This information bears directly and materially on the factual and legal questions at the heart of the proposed MTDC engagement. The central issue in the BIPA proceedings is whether TruScan 360's design enabled — or impeded — BIPA-compliant biometric-data handling. The firm's knowledge of TruScan 360's internal architecture, derived from the Pinnacle engagement, would give it an overwhelming informational advantage in representing MTDC — but the duty of confidentiality owed to Pinnacle under Rule 1.6 prohibits the firm from using or disclosing that information to MTDC's benefit and Pinnacle's detriment. This creates an irresolvable tension: the firm cannot represent MTDC competently without drawing on its knowledge of TruScan 360, yet it cannot use that knowledge without breaching its duty to Pinnacle.

Second, there is a significant risk that the firm could not vigorously advocate for MTDC. Effective representation of MTDC would require, among other things: (a) conducting a comprehensive forensic analysis of TruScan 360's data-handling practices; (b) deposing Pinnacle personnel, including engineers, product managers, and executives; (c) challenging TruScan 360's data-handling architecture as deficient under BIPA; (d) building a factual record supporting cross-claims against Pinnacle; and (e) negotiating with Pinnacle over indemnification. A reasonable lawyer could not undertake these activities vigorously and without reservation while simultaneously owing a duty of loyalty to Pinnacle and an obligation to protect Pinnacle's confidential information. The pull of competing loyalties would inevitably — and impermissibly — limit the firm's advocacy on MTDC's behalf, whether through conscious restraint or unconscious self-censorship.

Third, there is a significant risk that the firm's representation of Pinnacle would be materially limited by its knowledge of MTDC's legal strategy. If the firm were to represent MTDC, it would acquire intimate knowledge of MTDC's litigation strategy, its defenses to the class action and AG enforcement proceeding, its assessment of Pinnacle's liability, and its potential settlement positions. This information could materially limit the firm's ability to represent Pinnacle's interests, particularly in the event that Pinnacle is named as a co-respondent by the Attorney General, becomes a cross-claim defendant in the class action, or is drawn into indemnification proceedings. The firm would be unable to counsel Pinnacle fully regarding its exposure in these related matters without risking the disclosure or use of MTDC's confidential information.

Conclusion on Rule 1.7(a)(2): There is a significant risk that the firm's representation of MTDC would be materially limited by the firm's responsibilities to Pinnacle, and vice versa. A concurrent conflict of interest exists independently under Illinois Rule of Professional Conduct 1.7(a)(2).

D. Rule 1.7(b) — Waivability Assessment

Having identified concurrent conflicts under both Rule 1.7(a)(1) and Rule 1.7(a)(2), the analysis turns to whether the conflict may be cured by informed consent under Rule 1.7(b). Under Rule 1.7(b), a concurrent conflict may be waived only if all four prongs of the waivability test are satisfied. The General Counsel has analyzed each prong and concludes that the conflict is not waivable.

Prong (1) — Reasonable belief in competent and diligent representation. Rule 1.7(b)(1) requires that the lawyer "reasonably believe" that the lawyer will be able to provide competent and diligent representation to each affected client. This is an objective standard: it asks not whether the lawyer subjectively believes the dual representation is feasible, but whether a reasonable, disinterested lawyer would so conclude. Here, no reasonable lawyer could conclude that competent and diligent representation of both MTDC and Pinnacle is possible. The matters are not merely positionally inconsistent in unrelated fora — the type of conflict that, under certain circumstances, might be amenable to waiver. Rather, the matters involve the identical technology platform (TruScan 360), overlapping and indeed identical factual questions (the platform's biometric-data collection, processing, storage, and dissemination practices), and directly conflicting legal arguments (the platform is unlawful vs. the platform is legitimate and innovative). The firm's possession of extensive Pinnacle confidential technical information creates an additional and independent layer of impossibility. The firm cannot "unknow" what it knows about TruScan 360's internal architecture. Any attempt to represent MTDC while avoiding the use of Pinnacle's confidential information would compromise the quality of MTDC's representation. Any use, even inadvertent, of such information in the course of representing MTDC would constitute a breach of the firm's duty to Pinnacle. There is no configuration of screening walls, information barriers, or engagement protocols that could adequately address this fundamental structural problem. Prong (1) is not satisfied.

Prong (2) — Representation not prohibited by law. No specific statutory prohibition has been identified that would independently bar the representation. However, this prong operates as a necessary but not sufficient condition; it must be satisfied in conjunction with the other three prongs. The satisfaction of Prong (2) alone does not render the conflict waivable.

Prong (3) — No claim by one client against another in the same proceeding. Rule 1.7(b)(3) categorically prohibits informed consent where the representation involves "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." While MTDC and Pinnacle are not presently co-parties in the same litigation as of the date of this memorandum, the proposed scope of the MTDC engagement expressly includes the prosecution of cross-claims and indemnification proceedings against Pinnacle. If such cross-claims are filed in the Cook County class action (Case No. 2024-CH-04417), the firm would be asserting a claim by one client (MTDC) against another client (Pinnacle) in the same proceeding before a tribunal — precisely the scenario that Rule 1.7(b)(3) categorically prohibits. Moreover, if the Attorney General names Pinnacle as a co-respondent in the anticipated enforcement action, the firm could find itself representing MTDC in a proceeding in which Pinnacle is also a party, with MTDC's interests directly adverse to Pinnacle's. The categorical prohibition of Rule 1.7(b)(3) admits of no exception and cannot be cured by client consent. Prong (3) is not satisfied.

Prong (4) — Informed consent of each affected client. Even if the first three prongs could be satisfied — and they cannot — the process of obtaining informed consent would itself give rise to cascading confidentiality concerns that further preclude waiver. To seek consent from Pinnacle, the firm would need to disclose that MTDC is contemplating cross-claims and indemnification demands against Pinnacle — information that could prejudice MTDC's litigation posture and that MTDC has not authorized the firm to disclose. To seek consent from MTDC, the firm would need to disclose the existence and general nature of its relationship with Pinnacle — information that Pinnacle may consider confidential under the terms of its engagement letter with the firm. The firm cannot navigate these competing disclosure obligations without potentially breaching the duty of confidentiality owed to one or both clients. Prong (4) therefore cannot be satisfied in a manner consistent with the firm's other ethical obligations.

Conclusion on Rule 1.7(b): The conflict is not waivable by informed consent. No reasonable lawyer could conclude that competent and diligent representation of both clients is possible (Prong 1 fails). The proposed engagement contemplates the assertion of claims by one client against the other in the same proceeding before a tribunal (Prong 3 fails). And the process of seeking consent would itself compromise the firm's confidentiality obligations to both clients (Prong 4 fails). The firm may not proceed with the proposed MTDC engagement, even with the theoretical consent of both clients.

E. Rule 1.9 — Former-Client Analysis (Addressed for Completeness)

Rule 1.9 does not apply to the present analysis because Pinnacle Workforce Analytics, Inc. is a current client of the firm. Matter No. 1031-00001 remains active and ongoing, with discovery in the Pinnacle v. Veritas Biometrics patent case continuing and trial scheduled for March 2025. The attorney-client relationship between the firm and Pinnacle has not been terminated, and no steps toward termination have been taken or contemplated.

However, for the sake of completeness and to address any future scenario in which the Pinnacle engagement might conclude prior to the resolution of the MTDC matter, the General Counsel notes the following: Even if Pinnacle were treated as a former client, the proposed MTDC engagement would be barred under Rule 1.9(a). The two matters are "substantially related" within the meaning of Rule 1.9(a) because both center on TruScan 360's biometric-data platform, involve the same core technology and the same categories of factual and legal issues, and because the firm acquired confidential information from Pinnacle in the course of the patent-enforcement engagement that is material and directly relevant to the BIPA-related claims at issue in the proposed MTDC engagement. Under established Illinois precedent and the principles articulated in the Restatement (Third) of the Law Governing Lawyers § 132, a substantial relationship exists where the factual matters involved in the prior representation are so closely related to the facts in the proposed new representation that it must be assumed that confidential information relevant to the new matter was obtained during the prior representation. That standard is clearly met here. Accordingly, even under a former-client analysis, the representation would be prohibited.

F. Rule 1.10 — Imputation and Screening

Under Illinois Rule of Professional Conduct 1.10(a), the conflicts of any individual lawyer associated with the firm are imputed to all lawyers in the firm. Jonathan Mercer's conflict — arising from his active and ongoing representation of Pinnacle in Matter No. 1031-00001 — is therefore imputed to every attorney at Calderwood & Harkness, including Rachel Bernstein, Miriam Calloway, Devon Archer, and Nadia Petrov.

The limited screening exception codified in Rule 1.10(d) permits, under certain narrowly defined circumstances, the screening of a personally disqualified lawyer who acquired a conflict through a prior association with another firm and who has joined Calderwood & Harkness by lateral transfer. This exception is wholly inapplicable here. The conflict does not arise from a lateral hire's prior engagements; it arises from an ongoing concurrent representation by Jonathan Mercer, a current partner of the firm who has been with Calderwood & Harkness throughout the duration of the Pinnacle engagement.

Screening cannot cure a concurrent-client conflict of this nature. The Illinois Rules do not provide a screening mechanism for conflicts arising under Rule 1.7 in the concurrent-representation context. This is a deliberate feature of the ethical framework: when a firm simultaneously represents two clients whose interests are directly adverse or where there is a significant risk that one representation will materially limit the other, the conflict belongs to the firm as an institution, not merely to the individual attorney, and no internal barrier can remedy the institutional conflict.

Even if screening were theoretically available as a curative measure — and it is not — the screen would be inadequate on the facts of this case. The firm's involvement with Pinnacle dates to 2019. The relationship has spanned multiple matters and has involved the exchange of highly sensitive technical and commercial information over a period of five years. The Mercer team's deep knowledge of TruScan 360's architecture, data-handling practices, and business context cannot be effectively quarantined from the Bernstein team, particularly given the likelihood that both teams would need to analyze the same platform, the same technology, and the same factual issues. A screen that is more theoretical than practical serves neither client's interests and exposes the firm to disciplinary risk.

IV. Financial Considerations

The following financial information is documented for the Conflicts Committee's complete understanding of the matter's dimensions. Financial considerations do not alter the ethical analysis. The Rules of Professional Conduct do not permit a law firm to accept or decline an engagement based on revenue considerations where doing so would result in a violation of the concurrent-conflict rules. The information below is provided solely for contextual purposes.

No billable time has been recorded to Matter No. 1031-00001 at any point during the intake and conflicts-review process. The entire review was conducted as a firm administrative and ethical-compliance function, and no fees have been charged to MTDC or to any internal firm account.

V. Recommendation

Based on the analysis set forth in this memorandum, the General Counsel respectfully recommends that the Conflicts Committee take the following actions:

1. Determine that the conflict is unwaivable. The Committee should formally determine that the concurrent representation of MTDC and Pinnacle presents an unwaivable conflict of interest under Illinois Rules of Professional Conduct 1.7(a)(1) (direct adversity) and 1.7(a)(2) (material limitation), and that informed consent under Rule 1.7(b) cannot cure the conflict for the reasons set forth in Section III.D of this memorandum.

2. Direct that the proposed MTDC engagement be declined. The Committee should direct that the proposed MTDC engagement (Matter No. 1031-00001) be declined and that no attorney-client relationship be formed between Calderwood & Harkness LLP and Metropolitan Transit Development Corp. in connection with this matter or any matter substantially related to the BIPA proceedings involving TruScan 360.

3. Direct Rachel Bernstein to notify MTDC of the declination. The Committee should direct Rachel Bernstein, as the partner who initiated the intake process, to promptly notify MTDC's General Counsel, Terrence Whitfield, of the declination. The notification should be made in appropriately general terms, consistent with the firm's obligations under Rule 1.6 (Confidentiality of Information). Specifically, Bernstein should communicate that the firm has identified an unwaivable conflict of interest that prevents it from accepting the proposed engagement, without disclosing the identity of the existing client (Pinnacle) or the nature of the existing engagement beyond the fact that an unwaivable conflict exists. The notification should be made in writing and should be reviewed by the General Counsel prior to transmission.

4. Direct Rachel Bernstein to facilitate a referral to qualified alternative counsel. The Committee should direct Rachel Bernstein to offer MTDC a referral to qualified alternative counsel with substantial BIPA expertise and government-entity defense experience. The General Counsel has identified two firms that meet these criteria and are not conflicted:

(a) Aldridge, Paulson & Cho LLP, 150 North Michigan Avenue, Suite 3500, Chicago, IL 60601 (Contact: Victoria Aldridge). Aldridge, Paulson & Cho has a well-regarded privacy and data-security practice and has handled multiple BIPA class-action defense matters for public-sector clients.

(b) Northfield McKay LLP, 311 South Wacker Drive, Suite 4800, Chicago, IL 60606 (Contact: Damien Northfield). Northfield McKay has significant experience representing governmental entities in regulatory enforcement proceedings and has a dedicated biometric-privacy litigation team.

5. Direct Colleen Farrow to update the firm's conflicts database. The Committee should direct Colleen Farrow, Director of Conflicts & New Business, to update the firm's IntegrityCheck conflicts-management system to reflect MTDC as a declined prospective client, with a permanent cross-reference to Pinnacle Matter No. 1031-00001. The entry should include a notation of the basis for the declination (unwaivable concurrent-client conflict under Rules 1.7(a)(1) and 1.7(a)(2)) and should be coded to trigger a conflicts alert in the event of any future intake request involving MTDC, Pinnacle, or TruScan 360.

6. Confirm that no Pinnacle confidential information was disclosed to the proposed MTDC engagement team. The Committee should confirm, through appropriate inquiry, that no Pinnacle confidential information was disclosed to Rachel Bernstein, Miriam Calloway, Devon Archer, or Nadia Petrov at any point during the intake process. Based on the General Counsel's preliminary review, no such disclosure occurred — the intake process was halted at the conflicts-screening stage before any substantive work was performed — but a formal confirmation is appropriate. The Committee should direct Jonathan Mercer to provide a written confirmation to the General Counsel that no Pinnacle confidential information was shared with, or made accessible to, any member of the proposed MTDC engagement team.

7. Direct that Matter No. 1031-00001 be formally closed. The Committee should direct that Matter No. 1031-00001 be formally closed in all firm systems — including IntegrityCheck, the firm's document-management system, and the firm's time-and-billing system — with zero billings, zero disbursements, and a permanent notation that the matter was declined due to an unwaivable conflict of interest. No client file was created, and no work product exists that requires retention or disposition.

VI. Conclusion

The concurrent representation of Metropolitan Transit Development Corp. and Pinnacle Workforce Analytics, Inc. presents an unwaivable conflict of interest under the Illinois Rules of Professional Conduct. The conflict is grounded in direct adversity under Rule 1.7(a)(1), arising from Pinnacle's status as a named responsible party in the Attorney General's investigation, MTDC's contemplated cross-claims and indemnification demands against Pinnacle, and the irreconcilable legal characterizations of TruScan 360 that the two representations would require. The conflict is independently grounded in material limitation under Rule 1.7(a)(2), arising from the firm's possession of extensive Pinnacle confidential information directly relevant to the proposed MTDC engagement and the inevitable constraints on vigorous advocacy that dual representation would impose.

The conflict cannot be cured by informed consent under Rule 1.7(b). No reasonable lawyer could conclude that competent and diligent representation of both clients is possible. The proposed engagement contemplates the assertion of claims by one client against the other in the same proceeding before a tribunal, which Rule 1.7(b)(3) categorically prohibits. And the process of seeking consent would itself compromise the firm's confidentiality obligations to both clients.

The proposed MTDC engagement (Matter No. 1031-00001) must be declined. The General Counsel respectfully requests that the Conflicts Committee adopt the recommendations set forth in Section V and authorize their immediate implementation.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Helen Drazkowski

Title: General Counsel

Address: 600 Lexington Avenue, 38th Floor

New York, NY 10022

Date: May 14, 2024

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION This memorandum was prepared at the direction of the Conflicts Committee of Calderwood & Harkness LLP and is protected by the attorney-client privilege and the work-product doctrine. Distribution is limited to the individuals identified on the first page of this memorandum. Any unauthorized review, use, disclosure, or distribution is prohibited.

Financial Metric	Amount
Estimated foregone fees — proposed MTDC engagement (18–24 months)	$3,500,000 – $5,200,000
Annual billings from Pinnacle (FY 2023 actual, Matter No. 1031-00001)	$2,137,500
MTDC annual outside-counsel budget (all matters, all firms)	~$14,800,000
MTDC estimated BIPA exposure — negligent violation floor	$12,400,000
MTDC estimated BIPA exposure — intentional violation ceiling	$62,000,000
Pinnacle–MTDC MSLA total contract value (5-year initial term)	$8,700,000
Pinnacle–MTDC MSLA annual contract value	$1,740,000
Amount billed to MTDC under Matter No. 1031-00001 to date	$0
Amount of disbursements recorded to Matter No. 1031-00001 to date	$0

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION
CONFLICTS COMMITTEE ANALYSIS MEMORANDUM — FINAL
Prepared By: Helen Drazkowski, General Counsel, Calderwood & Harkness LLP
Date: May 14, 2024
Re: New-Matter Intake — Matter No. 1031-00001: Proposed Representation of Metropolitan Transit Development Corp. ("MTDC") — Conflict with Existing Client Pinnacle Workforce Analytics, Inc. ("Pinnacle") — Matter No. 1031-00001
Distribution:
Lawrence Keating (Chair, Conflicts Committee) Colleen Farrow (Director, Conflicts & New Business) Rachel Bernstein (Partner, Privacy & Data Security) Jonathan Mercer (Partner, intellectual Property / Patent Litigation)
Status: FINAL — Supersedes Draft dated May 13, 2024
This memorandum was prepared at the direction of the Conflicts Committee for consideration at its meeting of May 14, 2024. It summarizes the factual background, identifies the applicable ethical rules, sets forth the General Counsel's analysis of the conflict, and provides a recommendation for the Committee's action. All factual representations herein have been verified against materials in the firm's conflicts-management system, interviews with relevant partners, and publicly available records unless otherwise noted.
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I. Executive Summary
Calderwood & Harkness LLP has been asked by Metropolitan Transit Development Corp. ("MTDC"), a unit of local government and special-purpose transit authority organized under the Illinois Local Mass Transit District Act (70 ILCS 3610/1 et seq.), headquartered at 550 West Harrison Street, Suite 1400, Chicago, IL 60607, to undertake representation in connection with five related and interrelated matters: (a) defense of a Civil Investigative Demand (Ref. CRB-2024-0417) issued by the Illinois Attorney General's Bureau of Civil Rights on April 22, 2024; (b) defense of a putative employee class action filed in the Circuit Court of Cook County, Chancery Division, captioned Johnson et al. v. Metropolitan Transit Development Corp., Case No. 2024-CH-04417, filed on April 29, 2024; (c) counseling on the remediation of MTDC's biometric-data collection, storage, and dissemination practices under the Illinois Biometric Information Privacy Act, 740 ILCS 14/1 et seq. ("BIPA"); (d) prosecution of potential cross-claims and indemnification proceedings against technology vendors, including Pinnacle Workforce Analytics, Inc. ("Pinnacle"); and (e) related employment counseling concerning workforce-monitoring policies and procedures.
The proposed matter was opened as Matter No. 1031-00001 on May 9, 2024, with Rachel Bernstein designated as responsible partner. Pursuant to firm policy, a conflicts search was initiated contemporaneously with the new-matter intake request.
The conflicts search identified that the firm currently represents Pinnacle Workforce Analytics, Inc., a Delaware corporation headquartered at 11900 Sunrise Valley Drive, Suite 500, Reston, Virginia 20191, under Matter No. 1031-00001. That matter involves patent-enforcement litigation concerning Pinnacle's TruScan 360 biometric workforce-management platform — the same platform that is the central subject of the proposed MTDC engagement. The patent-enforcement matter, Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., Case No. 1:22-cv-01533 (E.D. Va.), was filed on September 6, 2022, and remains active and pending.
After a thorough analysis of the applicable ethical rules, the factual record, and the scope of both the existing and proposed engagements, the General Counsel concludes as follows: The conflict is unwaivable under Illinois Rules of Professional Conduct 1.7(a)(1) and 1.7(a)(2). Informed consent under Rule 1.7(b) cannot cure the conflict because no reasonable lawyer could conclude that competent and diligent representation of both MTDC and Pinnacle is possible, and because the proposed engagement contemplates the assertion of claims by one client against the other, which Rule 1.7(b)(3) categorically prohibits. The firm must decline the proposed MTDC engagement.
The estimated foregone fees associated with declining the proposed MTDC engagement range from approximately $3.5 million to $5.2 million over an anticipated 18- to 24-month engagement period. While financially significant, this consideration does not alter the ethical analysis and is documented solely for the Committee's complete understanding of the matter's dimensions.
II. Background
A. The Prospective Client — Metropolitan Transit Development Corp.
Metropolitan Transit Development Corp. ("MTDC") is a unit of local government and special-purpose transit authority established under the Illinois Local Mass Transit District Act, 70 ILCS 3610/1 et seq. MTDC is headquartered at 550 West Harrison Street, Suite 1400, Chicago, IL 60607. As a governmental body, MTDC is organized pursuant to enabling legislation and is governed by a board of directors appointed by the Governor of Illinois with the advice and consent of the Illinois Senate.
MTDC operates bus, commuter rail, and paratransit services across Cook County and five collar counties (DuPage, Kane, Lake, McHenry, and Will), serving a combined metropolitan population of approximately 8.6 million residents. MTDC reports that it serves approximately 1.6 million daily riders across its consolidated service network. The authority's annual operating budget is approximately $3.2 billion, funded through a combination of farebox revenue, federal formula grants under 49 U.S.C. § 5307, a dedicated 1.0% regional sales tax authorized by the Regional Transportation Authority Act, and direct appropriations from the State of Illinois.
The following individuals hold key leadership positions at MTDC:
•  Executive Director: Darnell Okafor
•  General Counsel: Terrence Whitfield
•  Chief Information Security Officer: Lucia Marchetti
MTDC's Employer Identification Number is 36-6041928.
MTDC's annual outside-counsel budget across all matters is approximately $14.8 million, as represented by Terrence Whitfield during his initial discussions with Rachel Bernstein. MTDC's existing outside litigation counsel is Hargrove, Tillman & Reese LLP, located at 233 South Wacker Drive, Suite 5600, Chicago, IL 60606, with Constance Hargrove serving as the lead relationship partner. It was Hargrove, Tillman & Reese that referred MTDC to Calderwood & Harkness specifically for data-privacy and biometric-law expertise, recognizing the specialized nature of the BIPA-related matters at issue.
MTDC's fiscal agent and bond trustee for outstanding transit revenue bonds is Meridian Trust National Bank, with Angela Tran serving as Chief Fiduciary Officer. This relationship is relevant to the present analysis because material BIPA liability could trigger reporting obligations under MTDC's Continuing Disclosure Agreement, executed pursuant to SEC Rule 15c2-12, as well as certain financial covenants contained in the bond indenture governing MTDC's outstanding Series 2019A and Series 2022B transit revenue bonds.
MTDC's consulting actuary, Lakefront Actuarial Advisors, LLC (Principal: Felix Drummond, FSA, MAAA), has performed an initial exposure analysis and estimated MTDC's aggregate BIPA statutory-damages exposure at between $12.4 million and $62.0 million. The low end of that range assumes negligent-violation damages of $1,000 per violation applied to an estimated class of 12,400 current and former employees (12,400 × $1,000 = $12,400,000). The high end assumes intentional-violation damages of $5,000 per violation applied to the same class (12,400 × $5,000 = $62,000,000). These figures do not account for potential penalties in the anticipated Attorney General enforcement action, attorneys' fees, or costs of remediation.
B. The Proposed Engagement — Matter No. 1031-00001
The initial contact from MTDC was made on May 6, 2024, when Terrence Whitfield, MTDC's General Counsel, called Rachel Bernstein at the firm's Chicago office to discuss the possibility of retaining Calderwood & Harkness for the BIPA-related matters described below. Bernstein and Whitfield had a preliminary conversation of approximately forty-five minutes, during which Whitfield described the general nature of the legal exposure and the pending proceedings. No confidential or privileged information was exchanged during this initial call beyond what was necessary to evaluate the potential engagement, consistent with firm intake protocols.
On May 9, 2024, Rachel Bernstein submitted a New-Matter Intake Request Form (C&H Form NM-1) along with a Conflicts Search Request Memorandum to Colleen Farrow, Director of Conflicts & New Business. The proposed matter was assigned Matter No. 1031-00001 on that same date.
The proposed engagement team is as follows:
•  Responsible Partner: Rachel Bernstein (Partner, Privacy & Data Security, Chicago office, One North Wacker Drive, Suite 4200, Chicago, IL 60606)
•  Billing Partner: Miriam Calloway (Partner, Healthcare & Life Sciences)
•  Lead Associate: Devon Archer (Associate, Labor & Employment)
•  Working Associate: Nadia Petrov (Associate, Labor & Employment)
The proposed hourly rates for the engagement are: $1,150 per hour for partner-level work (reflecting Bernstein's standard government-entity rate); $785 per hour for senior associate work (Archer); and $625 per hour for junior associate work (Petrov). Based on an estimated 18- to 24-month engagement duration and the anticipated complexity of the matters described below, total estimated fees are between $3.5 million and $5.2 million.
The proposed scope of the engagement encompasses the following five interrelated work streams:
(a) Defense of the Attorney General's Civil Investigative Demand. On April 22, 2024, the Illinois Attorney General's Bureau of Civil Rights issued a Civil Investigative Demand (Ref. CRB-2024-0417) to MTDC, directed by Deputy Attorney General for Civil Rights Malcolm Jeffries. The CID seeks extensive documentation concerning MTDC's deployment of biometric workforce-management technology, including the TruScan 360 platform provided by Pinnacle. The CID also names Pinnacle as a "responsible party" in connection with the matters under investigation. The AG's office has retained outside special counsel Ridgeway & Falk LLP (401 East Adams Street, Suite 300, Springfield, IL 62701; lead partner: Diane Falk) to assist in the investigation. Based on informal communications between Ridgeway & Falk and MTDC's existing counsel, it is anticipated that the AG may file a formal BIPA enforcement action against MTDC, and potentially against Pinnacle as a co-respondent, if the CID response is deemed unsatisfactory.
(b) Defense of the Putative Employee Class Action. On April 29, 2024, a putative class action was filed in the Circuit Court of Cook County, Chancery Division, captioned Johnson et al. v. Metropolitan Transit Development Corp., Case No. 2024-CH-04417. The complaint was filed on behalf of approximately 12,400 current and former MTDC employees who allege that MTDC collected, stored, and disseminated their biometric identifiers and biometric information — including fingerprints, facial-geometry scans, and iris scans — in violation of BIPA, 740 ILCS 14/15(a), (b), (c), (d), and (e). Plaintiffs' class counsel is Kessler, Brandt & O'Neill LLP (120 North LaSalle Street, Suite 2200, Chicago, IL 60602), with Martin Kessler serving as lead class counsel and Yolanda Brandt as co-counsel. The complaint alleges that MTDC implemented the TruScan 360 system without obtaining the requisite written informed consent, without publishing a publicly available retention schedule and guidelines for destruction of biometric data, and without implementing adequate safeguards against unauthorized dissemination.
(c) BIPA Remediation Counseling. The proposed engagement would include advising MTDC on the remediation of its biometric-data collection, storage, and dissemination practices to achieve compliance with BIPA and the Illinois Personal Information Protection Act, 815 ILCS 530/1 et seq. This would involve a comprehensive review of the TruScan 360 platform's data-handling architecture, the development of compliant consent protocols, the establishment of biometric-data retention and destruction schedules, and the implementation of technical and administrative safeguards.
(d) Cross-Claims and Indemnification Proceedings Against Technology Vendors. The proposed engagement scope expressly includes the investigation, preparation, and prosecution of potential cross-claims and indemnification demands against technology vendors, including and specifically Pinnacle Workforce Analytics, Inc. These claims would be asserted under the Master Software License and Services Agreement ("MSLA") between MTDC and Pinnacle, dated June 15, 2021. The MSLA has a total contract value of $8,700,000 over a five-year initial term (i.e., $1,740,000 per year), with an optional three-year renewal, and a term running from June 15, 2021 through June 14, 2026. The MSLA contains indemnification provisions (Section 9.2), limitation-of-liability clauses (Section 10.1), and representations and warranties concerning legal compliance (Section 7.3) that would be central to any cross-claim or indemnification proceeding. MTDC's position, as communicated by Whitfield, is that Pinnacle bore primary responsibility for ensuring TruScan 360's compliance with applicable biometric-data privacy laws and that Pinnacle's failure to design the platform for BIPA compliance constitutes a material breach of the MSLA and triggers Pinnacle's indemnification obligations.
(e) Related Employment Counseling. The proposed engagement would also encompass advice on MTDC's workforce-monitoring policies, including the development of revised timekeeping and scheduling protocols that do not rely on biometric identification, or that implement biometric identification in a BIPA-compliant manner. This work stream would interface with MTDC's human resources and labor-relations functions and would address collective-bargaining implications, if any, of changes to workforce-monitoring practices.
C. The Existing Client — Pinnacle Workforce Analytics, Inc.
Pinnacle Workforce Analytics, Inc. ("Pinnacle") is a Delaware corporation with its registered agent at Cobalt Ridge Technologies, 1209 Orange Street, Wilmington, DE 19801. Pinnacle's principal place of business is located at 11900 Sunrise Valley Drive, Suite 500, Reston, VA 20191. Pinnacle's Employer Identification Number is 54-2198437.
Pinnacle develops and licenses biometric workforce-management software. Its flagship product is "TruScan 360," an AI-powered timekeeping and scheduling platform that utilizes fingerprint, facial-geometry, and iris-scan data to authenticate employee identity for purposes of time-and-attendance tracking, facility access management, and workforce scheduling. TruScan 360 is deployed by over 200 enterprise and governmental customers across the United States, according to Pinnacle's publicly available marketing materials. Pinnacle reports annual revenues of approximately $485 million.
The following individuals hold key leadership positions at Pinnacle:
•  Chief Executive Officer: Gregory Harmon
•  General Counsel: Sandra Yee
Pinnacle sold and deployed TruScan 360 to MTDC under the MSLA dated June 15, 2021, as described in Section II.B above. Calderwood & Harkness has represented Pinnacle since 2019 in various patent-licensing and enforcement matters related to TruScan 360's core biometric-recognition algorithms. The relationship between the firm and Pinnacle is well-established and has involved the exchange of highly sensitive technical and commercial information over a multi-year period.
D. The Existing Calderwood & Harkness Engagement — Matter No. 1031-00001
Matter No. 1031-00001 was opened on March 14, 2022. The responsible and billing partner for the matter is Jonathan Mercer (Partner, intellectual Property / Patent Litigation). The lead associate assigned to the matter is Priya Subramaniam (Associate, intellectual Property).
The nature of the engagement is patent-infringement litigation. Pinnacle, as plaintiff, has asserted claims of patent infringement against Veritas Biometrics Corp. ("Veritas"), a Delaware corporation headquartered at 8200 Greensboro Drive, Suite 1100, McLean, VA 22102, with Randall Cho serving as CEO. The action, Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., was filed on September 6, 2022, in the United States District Court for the Eastern District of Virginia, and is docketed as Case No. 1:22-cv-01533. Veritas is represented in the litigation by Whitmore & Sato LLP (999 Waterside Drive, Suite 600, Norfolk, VA 23510; lead partner: Akira Sato).
The patent-enforcement action involves three utility patents covering TruScan 360's core biometric-recognition algorithms, specifically U.S. Patent Nos. 10,XXX,XXX, 10,XXX,XXX, and 11,XXX,XXX. Pinnacle alleges that Veritas's competing biometric workforce-management product infringes these patents. The litigation has involved extensive discovery, including the production and review of TruScan 360's technical specifications, source-code architecture summaries, data-flow diagrams, algorithm design documents, and patent-prosecution correspondence. The firm's litigation team, led by Mercer and Subramaniam, has developed deep familiarity with TruScan 360's internal architecture and the technical details of its biometric-data processing capabilities.
The matter is critical to the point that must be emphasized: the patent matter concerns the same TruScan 360 biometric platform that is at the center of the proposed MTDC engagement. The factual overlap between the two matters is not incidental or tangential; it is complete and fundamental.
Actual billings from Pinnacle for fiscal year 2023, attributable to Matter No. 1031-00001, were $2,137,500. The matter remains active and ongoing, with discovery scheduled to close on September 30, 2024, and trial currently set for March 2025 on the court's docket.
E. Procedural History of the Conflicts Review
The conflicts review followed the firm's standard intake and review procedures, as outlined below:
May 9, 2024: Rachel Bernstein submitted the New-Matter Intake Request Form (C&H Form NM-1) and a Conflicts Search Request Memorandum to Colleen Farrow, Director of Conflicts & New Business. The submission identified MTDC as the prospective client, described the general nature of the proposed engagement (BIPA defense and remediation counseling), and listed the key adverse and interested parties known at that time, including the Illinois Attorney General's Bureau of Civil Rights, the named plaintiffs in the class action, and technology vendors identified in the MTDC materials, including Pinnacle Workforce Analytics, Inc.
May 9, 2024: The Conflicts & New Business team initiated Conflicts Search Round 1, running the prospective client and all identified parties through the firm's IntegrityCheck conflicts-management database.
May 10, 2024: The Conflicts Search Report (Round 1) was issued. The search identified a direct match for Pinnacle Workforce Analytics, Inc. under Matter No. 1031-00001 (Responsible Partner: Jonathan Mercer; Nature of Matter: Patent Enforcement — TruScan 360 Biometric Platform). The report flagged both a direct-adversity issue under Illinois Rule of Professional Conduct 1.7(a)(1) and a material-limitation issue under Rule 1.7(a)(2). No other conflicts were identified in Round 1 beyond the Pinnacle matter.
May 10, 2024: Rachel Bernstein emailed Jonathan Mercer to notify him of the potential conflict and to request his assessment of the scope and sensitivity of the Pinnacle engagement. Mercer responded the same day, confirming the active and ongoing nature of the Pinnacle representation, the centrality of TruScan 360 to the patent litigation, and the extensive confidential technical information in the firm's possession. Mercer expressed concern that the proposed MTDC engagement would create a direct adversity to Pinnacle and noted that the firm's position in the patent case requires it to champion TruScan 360 as a lawful and innovative technology — a position fundamentally inconsistent with the anticipated arguments in the MTDC matter.
May 13, 2024: The Supplemental Conflicts Search Report (Round 2) was issued. This expanded search included Pinnacle's corporate affiliates and subsidiaries, known subcontractors involved in TruScan 360's deployment, current and former MTDC board members, Veritas Biometrics Corp. (the defendant in the existing Pinnacle patent case), and Lakefront Actuarial Advisors, LLC. The Round 2 report confirmed that no additional conflicts exist beyond the Pinnacle issue previously identified. Specifically, the firm does not represent and has not represented Veritas Biometrics Corp., any MTDC board member in an individual capacity, Lakefront Actuarial Advisors, Kessler Brandt & O'Neill (plaintiffs' class counsel), or Ridgeway & Falk (the AG's outside special counsel).
May 13, 2024: Rachel Bernstein formally escalated the conflict to the Conflicts Committee by email to Lawrence Keating (Chair), with copies to Helen Drazkowski (General Counsel) and Colleen Farrow (Director, Conflicts & New Business). The escalation email included a detailed summary of the proposed engagement, the conflicts search results, Mercer's assessment, and Bernstein's preliminary view that the conflict was likely unwaivable.
May 13, 2024: A draft analysis memorandum was prepared by Helen Drazkowski and circulated to the Committee members and to Bernstein and Mercer for factual verification.
May 14, 2024: This Final analysis memorandum was prepared, incorporating corrections and additional detail received from Bernstein and Mercer. The Conflicts Committee meeting is scheduled for later today, May 14, 2024.
III. Conflicts Analysis
A. Applicable Ethical Framework
The Illinois Rules of Professional Conduct govern this analysis. Illinois is the controlling jurisdiction because: (i) the proposed engagement would be handled principally from the firm's Chicago office (One North Wacker Drive, Suite 4200, Chicago, IL 60606); (ii) MTDC is an Illinois governmental entity established under Illinois law; (iii) the underlying proceedings — both the Attorney General's CID and enforcement investigation and the putative class action — are pending before Illinois state authorities and in the Circuit Court of Cook County; and (iv) the BIPA and related statutes at issue are Illinois statutes. Although the existing Pinnacle matter is pending in the U.S. District Court for the Eastern District of Virginia, the conflict arises in connection with the proposed new engagement, which is anchored in Illinois.
The following rules are directly applicable:
Rule 1.7(a)(1) — Direct Adversity. A lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if the representation of one client will be directly adverse to another client. Direct adversity exists when a lawyer's actions on behalf of one client will injure, prejudice, or harm the interests of another current client.
Rule 1.7(a)(2) — Material Limitation. A concurrent conflict of interest also exists where 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 standard is broader than the direct-adversity standard and captures situations where, even absent head-to-head opposition, the lawyer's duties to one client may constrain or inhibit the lawyer's ability to act vigorously on behalf of another.
Rule 1.7(b) — Waivability by Informed Consent. Notwithstanding a concurrent conflict of interest under Rule 1.7(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.
Rule 1.9 — Duties to Former Clients. While not directly applicable because Pinnacle is a current client, Rule 1.9 is addressed for completeness. Under Rule 1.9(a), a lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related 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.
Rule 1.10 — Imputation of Conflicts. Under Rule 1.10(a), while lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so under Rules 1.7 or 1.9. Rule 1.10(d) provides a limited screening exception for personally disqualified lawyers who joined the firm by lateral transfer, but this exception does not apply to conflicts arising from ongoing representations by current partners of the firm.
The relevant statutory provisions underlying the proposed MTDC engagement are the Illinois Biometric Information Privacy Act, 740 ILCS 14/1 et seq. ("BIPA"), and the Illinois Personal Information Protection Act, 815 ILCS 530/1 et seq. ("PIPA").
B. Rule 1.7(a)(1) — Direct Adversity Analysis
The proposed MTDC engagement would be directly adverse to Pinnacle Workforce Analytics, Inc. in at least three independent and mutually reinforcing respects.
First, Pinnacle is a named responsible party in the Attorney General's CID. The Illinois Attorney General's Civil Investigative Demand (Ref. CRB-2024-0417), issued April 22, 2024, expressly names Pinnacle as a "responsible party" in connection with MTDC's deployment of TruScan 360. The CID's scope encompasses Pinnacle's role in the design, licensing, deployment, and configuration of the TruScan 360 platform's biometric-data collection and processing features. The AG's office, through outside special counsel Ridgeway & Falk LLP, has indicated that it may name Pinnacle as a co-respondent in the anticipated BIPA enforcement action if the investigation produces evidence that Pinnacle contributed to or facilitated MTDC's alleged statutory violations. Representing MTDC in responding to the CID would necessarily require the firm to develop factual narratives and legal arguments concerning Pinnacle's role in the design and deployment of TruScan 360 — arguments that could implicate Pinnacle's conduct, expose Pinnacle to additional liability, and shape the evidentiary record in a manner adverse to Pinnacle's interests. The firm cannot simultaneously defend MTDC before the AG's office and protect Pinnacle's interests; the two positions are inherently antagonistic.
Second, MTDC's anticipated cross-claims and indemnification demands against Pinnacle constitute paradigmatic direct adversity. The proposed engagement scope, as described in Section II.B(d), expressly includes the investigation, preparation, and prosecution of cross-claims and indemnification demands against technology vendors, including Pinnacle, under the MSLA dated June 15, 2021. This would require Calderwood & Harkness to assert affirmative claims — breach of contract, breach of warranty, and contractual indemnification — on behalf of MTDC directly against Pinnacle, the firm's own existing client. There is no more straightforward example of direct adversity than a law firm suing its own client on behalf of another client. The indemnification provisions of the MSLA (Section 9.2), the limitation-of-liability clauses (Section 10.1), and the compliance representations and warranties (Section 7.3) would all be at issue. The firm's intimate knowledge of Pinnacle's business, its technology, and its contractual practices — gained through the existing attorney-client relationship — would inevitably inform, consciously or unconsciously, the firm's approach to asserting claims on MTDC's behalf. This is precisely the scenario the concurrent-client conflict rules are designed to prevent.
Third, the two representations would require the firm to advance irreconcilable legal characterizations of TruScan 360. In the proposed MTDC engagement, the firm would be required to argue — before the Illinois Attorney General, the Circuit Court of Cook County, and potentially in cross-claim proceedings — that TruScan 360's biometric-data collection, storage, and dissemination practices violated BIPA (740 ILCS 14/15(a)–(e)) and the Illinois Personal Information Protection Act (815 ILCS 530/1 et seq.). The thrust of MTDC's defense and cross-claims would be that TruScan 360 was designed in a manner that made BIPA-compliant deployment difficult or impossible, that Pinnacle failed to implement adequate safeguards for biometric data, and that the platform's data-handling architecture constituted an unlawful surveillance mechanism. Simultaneously, in the patent-enforcement action (Matter No. 1031-00001, Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., E.D. Va. Case No. 1:22-cv-01533), the firm is affirmatively championing TruScan 360 as a legitimate, innovative, and commercially valuable biometric technology. The patent case requires the firm to establish the ingenuity of TruScan 360's biometric-recognition algorithms, the novelty and nonobviousness of its data-processing methods, and the platform's commercial success — arguments that necessarily presuppose the lawfulness and social value of the technology's biometric capabilities. To argue in one forum that TruScan 360 is an unlawful surveillance tool while arguing in another forum that it is a groundbreaking and legitimate technological innovation is to advance positions that are diametrically opposed and fundamentally inconsistent. While the legal standards differ between a BIPA compliance proceeding and a patent-infringement action, the factual characterizations of the platform's capabilities and data-handling practices cannot be reconciled. Opposing counsel in either matter could use the firm's arguments in the other matter to devastating effect.
Conclusion on Rule 1.7(a)(1): For each of the three independent reasons set forth above — and all the more so in combination — the proposed MTDC representation would be directly adverse to Pinnacle Workforce Analytics, Inc. A concurrent conflict of interest exists under Illinois Rule of Professional Conduct 1.7(a)(1).
C. Rule 1.7(a)(2) — Material Limitation Analysis
Even if the direct adversity identified in Section III.B did not exist — and it plainly does — a concurrent conflict of interest would independently exist under Rule 1.7(a)(2) because there is a significant risk that the firm's representation of MTDC would be materially limited by the firm's responsibilities to Pinnacle.
First, the firm possesses categories of Pinnacle confidential information that are directly relevant to the claims MTDC would assert. Through its representation of Pinnacle in Matter No. 1031-00001, the firm has obtained and reviewed extensive categories of highly sensitive, proprietary, and confidential Pinnacle information. Jonathan Mercer's team has confirmed, both in the May 10 email correspondence and in a subsequent conversation with the General Counsel on May 13, that the firm's files and the knowledge of its attorneys include, at a minimum:
(i) detailed technical specifications of TruScan 360, including hardware and software component documentation;
(ii) source-code architecture summaries and code-flow diagrams that describe the software's internal logic for biometric-data capture, encryption, and authentication;
(iii) data-flow diagrams that detail precisely how biometric data is collected from end users, processed by the TruScan 360 application layer, transmitted to Pinnacle's cloud infrastructure, stored in Pinnacle's databases, and retained or destroyed according to Pinnacle's internal policies;
(iv) Pinnacle's biometric-data retention and destruction policies, including internal policy memoranda and configuration parameters governing how long biometric templates are stored and under what conditions they are purged;
(v) algorithm design documents describing the mathematical and computational methods underlying TruScan 360's fingerprint-matching, facial-geometry analysis, and iris-recognition capabilities; and
(vi) patent-prosecution correspondence with the United States Patent and Trademark Office, including inventor declarations, prior-art analyses, and claim-construction arguments.
This information bears directly and materially on the factual and legal questions at the heart of the proposed MTDC engagement. The central issue in the BIPA proceedings is whether TruScan 360's design enabled — or impeded — BIPA-compliant biometric-data handling. The firm's knowledge of TruScan 360's internal architecture, derived from the Pinnacle engagement, would give it an overwhelming informational advantage in representing MTDC — but the duty of confidentiality owed to Pinnacle under Rule 1.6 prohibits the firm from using or disclosing that information to MTDC's benefit and Pinnacle's detriment. This creates an irresolvable tension: the firm cannot represent MTDC competently without drawing on its knowledge of TruScan 360, yet it cannot use that knowledge without breaching its duty to Pinnacle.
Second, there is a significant risk that the firm could not vigorously advocate for MTDC. Effective representation of MTDC would require, among other things: (a) conducting a comprehensive forensic analysis of TruScan 360's data-handling practices; (b) deposing Pinnacle personnel, including engineers, product managers, and executives; (c) challenging TruScan 360's data-handling architecture as deficient under BIPA; (d) building a factual record supporting cross-claims against Pinnacle; and (e) negotiating with Pinnacle over indemnification. A reasonable lawyer could not undertake these activities vigorously and without reservation while simultaneously owing a duty of loyalty to Pinnacle and an obligation to protect Pinnacle's confidential information. The pull of competing loyalties would inevitably — and impermissibly — limit the firm's advocacy on MTDC's behalf, whether through conscious restraint or unconscious self-censorship.
Third, there is a significant risk that the firm's representation of Pinnacle would be materially limited by its knowledge of MTDC's legal strategy. If the firm were to represent MTDC, it would acquire intimate knowledge of MTDC's litigation strategy, its defenses to the class action and AG enforcement proceeding, its assessment of Pinnacle's liability, and its potential settlement positions. This information could materially limit the firm's ability to represent Pinnacle's interests, particularly in the event that Pinnacle is named as a co-respondent by the Attorney General, becomes a cross-claim defendant in the class action, or is drawn into indemnification proceedings. The firm would be unable to counsel Pinnacle fully regarding its exposure in these related matters without risking the disclosure or use of MTDC's confidential information.
Conclusion on Rule 1.7(a)(2): There is a significant risk that the firm's representation of MTDC would be materially limited by the firm's responsibilities to Pinnacle, and vice versa. A concurrent conflict of interest exists independently under Illinois Rule of Professional Conduct 1.7(a)(2).
D. Rule 1.7(b) — Waivability Assessment
Having identified concurrent conflicts under both Rule 1.7(a)(1) and Rule 1.7(a)(2), the analysis turns to whether the conflict may be cured by informed consent under Rule 1.7(b). Under Rule 1.7(b), a concurrent conflict may be waived only if all four prongs of the waivability test are satisfied. The General Counsel has analyzed each prong and concludes that the conflict is not waivable.
Prong (1) — Reasonable belief in competent and diligent representation. Rule 1.7(b)(1) requires that the lawyer "reasonably believe" that the lawyer will be able to provide competent and diligent representation to each affected client. This is an objective standard: it asks not whether the lawyer subjectively believes the dual representation is feasible, but whether a reasonable, disinterested lawyer would so conclude. Here, no reasonable lawyer could conclude that competent and diligent representation of both MTDC and Pinnacle is possible. The matters are not merely positionally inconsistent in unrelated fora — the type of conflict that, under certain circumstances, might be amenable to waiver. Rather, the matters involve the identical technology platform (TruScan 360), overlapping and indeed identical factual questions (the platform's biometric-data collection, processing, storage, and dissemination practices), and directly conflicting legal arguments (the platform is unlawful vs. the platform is legitimate and innovative). The firm's possession of extensive Pinnacle confidential technical information creates an additional and independent layer of impossibility. The firm cannot "unknow" what it knows about TruScan 360's internal architecture. Any attempt to represent MTDC while avoiding the use of Pinnacle's confidential information would compromise the quality of MTDC's representation. Any use, even inadvertent, of such information in the course of representing MTDC would constitute a breach of the firm's duty to Pinnacle. There is no configuration of screening walls, information barriers, or engagement protocols that could adequately address this fundamental structural problem. Prong (1) is not satisfied.
Prong (2) — Representation not prohibited by law. No specific statutory prohibition has been identified that would independently bar the representation. However, this prong operates as a necessary but not sufficient condition; it must be satisfied in conjunction with the other three prongs. The satisfaction of Prong (2) alone does not render the conflict waivable.
Prong (3) — No claim by one client against another in the same proceeding. Rule 1.7(b)(3) categorically prohibits informed consent where the representation involves "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." While MTDC and Pinnacle are not presently co-parties in the same litigation as of the date of this memorandum, the proposed scope of the MTDC engagement expressly includes the prosecution of cross-claims and indemnification proceedings against Pinnacle. If such cross-claims are filed in the Cook County class action (Case No. 2024-CH-04417), the firm would be asserting a claim by one client (MTDC) against another client (Pinnacle) in the same proceeding before a tribunal — precisely the scenario that Rule 1.7(b)(3) categorically prohibits. Moreover, if the Attorney General names Pinnacle as a co-respondent in the anticipated enforcement action, the firm could find itself representing MTDC in a proceeding in which Pinnacle is also a party, with MTDC's interests directly adverse to Pinnacle's. The categorical prohibition of Rule 1.7(b)(3) admits of no exception and cannot be cured by client consent. Prong (3) is not satisfied.
Prong (4) — Informed consent of each affected client. Even if the first three prongs could be satisfied — and they cannot — the process of obtaining informed consent would itself give rise to cascading confidentiality concerns that further preclude waiver. To seek consent from Pinnacle, the firm would need to disclose that MTDC is contemplating cross-claims and indemnification demands against Pinnacle — information that could prejudice MTDC's litigation posture and that MTDC has not authorized the firm to disclose. To seek consent from MTDC, the firm would need to disclose the existence and general nature of its relationship with Pinnacle — information that Pinnacle may consider confidential under the terms of its engagement letter with the firm. The firm cannot navigate these competing disclosure obligations without potentially breaching the duty of confidentiality owed to one or both clients. Prong (4) therefore cannot be satisfied in a manner consistent with the firm's other ethical obligations.
Conclusion on Rule 1.7(b): The conflict is not waivable by informed consent. No reasonable lawyer could conclude that competent and diligent representation of both clients is possible (Prong 1 fails). The proposed engagement contemplates the assertion of claims by one client against the other in the same proceeding before a tribunal (Prong 3 fails). And the process of seeking consent would itself compromise the firm's confidentiality obligations to both clients (Prong 4 fails). The firm may not proceed with the proposed MTDC engagement, even with the theoretical consent of both clients.
E. Rule 1.9 — Former-Client Analysis (Addressed for Completeness)
Rule 1.9 does not apply to the present analysis because Pinnacle Workforce Analytics, Inc. is a current client of the firm. Matter No. 1031-00001 remains active and ongoing, with discovery in the Pinnacle v. Veritas Biometrics patent case continuing and trial scheduled for March 2025. The attorney-client relationship between the firm and Pinnacle has not been terminated, and no steps toward termination have been taken or contemplated.
However, for the sake of completeness and to address any future scenario in which the Pinnacle engagement might conclude prior to the resolution of the MTDC matter, the General Counsel notes the following: Even if Pinnacle were treated as a former client, the proposed MTDC engagement would be barred under Rule 1.9(a). The two matters are "substantially related" within the meaning of Rule 1.9(a) because both center on TruScan 360's biometric-data platform, involve the same core technology and the same categories of factual and legal issues, and because the firm acquired confidential information from Pinnacle in the course of the patent-enforcement engagement that is material and directly relevant to the BIPA-related claims at issue in the proposed MTDC engagement. Under established Illinois precedent and the principles articulated in the Restatement (Third) of the Law Governing Lawyers § 132, a substantial relationship exists where the factual matters involved in the prior representation are so closely related to the facts in the proposed new representation that it must be assumed that confidential information relevant to the new matter was obtained during the prior representation. That standard is clearly met here. Accordingly, even under a former-client analysis, the representation would be prohibited.
F. Rule 1.10 — Imputation and Screening
Under Illinois Rule of Professional Conduct 1.10(a), the conflicts of any individual lawyer associated with the firm are imputed to all lawyers in the firm. Jonathan Mercer's conflict — arising from his active and ongoing representation of Pinnacle in Matter No. 1031-00001 — is therefore imputed to every attorney at Calderwood & Harkness, including Rachel Bernstein, Miriam Calloway, Devon Archer, and Nadia Petrov.
The limited screening exception codified in Rule 1.10(d) permits, under certain narrowly defined circumstances, the screening of a personally disqualified lawyer who acquired a conflict through a prior association with another firm and who has joined Calderwood & Harkness by lateral transfer. This exception is wholly inapplicable here. The conflict does not arise from a lateral hire's prior engagements; it arises from an ongoing concurrent representation by Jonathan Mercer, a current partner of the firm who has been with Calderwood & Harkness throughout the duration of the Pinnacle engagement.
Screening cannot cure a concurrent-client conflict of this nature. The Illinois Rules do not provide a screening mechanism for conflicts arising under Rule 1.7 in the concurrent-representation context. This is a deliberate feature of the ethical framework: when a firm simultaneously represents two clients whose interests are directly adverse or where there is a significant risk that one representation will materially limit the other, the conflict belongs to the firm as an institution, not merely to the individual attorney, and no internal barrier can remedy the institutional conflict.
Even if screening were theoretically available as a curative measure — and it is not — the screen would be inadequate on the facts of this case. The firm's involvement with Pinnacle dates to 2019. The relationship has spanned multiple matters and has involved the exchange of highly sensitive technical and commercial information over a period of five years. The Mercer team's deep knowledge of TruScan 360's architecture, data-handling practices, and business context cannot be effectively quarantined from the Bernstein team, particularly given the likelihood that both teams would need to analyze the same platform, the same technology, and the same factual issues. A screen that is more theoretical than practical serves neither client's interests and exposes the firm to disciplinary risk.
IV. Financial Considerations
The following financial information is documented for the Conflicts Committee's complete understanding of the matter's dimensions. Financial considerations do not alter the ethical analysis. The Rules of Professional Conduct do not permit a law firm to accept or decline an engagement based on revenue considerations where doing so would result in a violation of the concurrent-conflict rules. The information below is provided solely for contextual purposes.
No billable time has been recorded to Matter No. 1031-00001 at any point during the intake and conflicts-review process. The entire review was conducted as a firm administrative and ethical-compliance function, and no fees have been charged to MTDC or to any internal firm account.
V. Recommendation
Based on the analysis set forth in this memorandum, the General Counsel respectfully recommends that the Conflicts Committee take the following actions:
1.  Determine that the conflict is unwaivable. The Committee should formally determine that the concurrent representation of MTDC and Pinnacle presents an unwaivable conflict of interest under Illinois Rules of Professional Conduct 1.7(a)(1) (direct adversity) and 1.7(a)(2) (material limitation), and that informed consent under Rule 1.7(b) cannot cure the conflict for the reasons set forth in Section III.D of this memorandum.
2.  Direct that the proposed MTDC engagement be declined. The Committee should direct that the proposed MTDC engagement (Matter No. 1031-00001) be declined and that no attorney-client relationship be formed between Calderwood & Harkness LLP and Metropolitan Transit Development Corp. in connection with this matter or any matter substantially related to the BIPA proceedings involving TruScan 360.
3.  Direct Rachel Bernstein to notify MTDC of the declination. The Committee should direct Rachel Bernstein, as the partner who initiated the intake process, to promptly notify MTDC's General Counsel, Terrence Whitfield, of the declination. The notification should be made in appropriately general terms, consistent with the firm's obligations under Rule 1.6 (Confidentiality of Information). Specifically, Bernstein should communicate that the firm has identified an unwaivable conflict of interest that prevents it from accepting the proposed engagement, without disclosing the identity of the existing client (Pinnacle) or the nature of the existing engagement beyond the fact that an unwaivable conflict exists. The notification should be made in writing and should be reviewed by the General Counsel prior to transmission.
4.  Direct Rachel Bernstein to facilitate a referral to qualified alternative counsel. The Committee should direct Rachel Bernstein to offer MTDC a referral to qualified alternative counsel with substantial BIPA expertise and government-entity defense experience. The General Counsel has identified two firms that meet these criteria and are not conflicted:
(a) Aldridge, Paulson & Cho LLP, 150 North Michigan Avenue, Suite 3500, Chicago, IL 60601 (Contact: Victoria Aldridge). Aldridge, Paulson & Cho has a well-regarded privacy and data-security practice and has handled multiple BIPA class-action defense matters for public-sector clients.
(b) Northfield McKay LLP, 311 South Wacker Drive, Suite 4800, Chicago, IL 60606 (Contact: Damien Northfield). Northfield McKay has significant experience representing governmental entities in regulatory enforcement proceedings and has a dedicated biometric-privacy litigation team.
5.  Direct Colleen Farrow to update the firm's conflicts database. The Committee should direct Colleen Farrow, Director of Conflicts & New Business, to update the firm's IntegrityCheck conflicts-management system to reflect MTDC as a declined prospective client, with a permanent cross-reference to Pinnacle Matter No. 1031-00001. The entry should include a notation of the basis for the declination (unwaivable concurrent-client conflict under Rules 1.7(a)(1) and 1.7(a)(2)) and should be coded to trigger a conflicts alert in the event of any future intake request involving MTDC, Pinnacle, or TruScan 360.
6.  Confirm that no Pinnacle confidential information was disclosed to the proposed MTDC engagement team. The Committee should confirm, through appropriate inquiry, that no Pinnacle confidential information was disclosed to Rachel Bernstein, Miriam Calloway, Devon Archer, or Nadia Petrov at any point during the intake process. Based on the General Counsel's preliminary review, no such disclosure occurred — the intake process was halted at the conflicts-screening stage before any substantive work was performed — but a formal confirmation is appropriate. The Committee should direct Jonathan Mercer to provide a written confirmation to the General Counsel that no Pinnacle confidential information was shared with, or made accessible to, any member of the proposed MTDC engagement team.
7.  Direct that Matter No. 1031-00001 be formally closed. The Committee should direct that Matter No. 1031-00001 be formally closed in all firm systems — including IntegrityCheck, the firm's document-management system, and the firm's time-and-billing system — with zero billings, zero disbursements, and a permanent notation that the matter was declined due to an unwaivable conflict of interest. No client file was created, and no work product exists that requires retention or disposition.
VI. Conclusion
The concurrent representation of Metropolitan Transit Development Corp. and Pinnacle Workforce Analytics, Inc. presents an unwaivable conflict of interest under the Illinois Rules of Professional Conduct. The conflict is grounded in direct adversity under Rule 1.7(a)(1), arising from Pinnacle's status as a named responsible party in the Attorney General's investigation, MTDC's contemplated cross-claims and indemnification demands against Pinnacle, and the irreconcilable legal characterizations of TruScan 360 that the two representations would require. The conflict is independently grounded in material limitation under Rule 1.7(a)(2), arising from the firm's possession of extensive Pinnacle confidential information directly relevant to the proposed MTDC engagement and the inevitable constraints on vigorous advocacy that dual representation would impose.
The conflict cannot be cured by informed consent under Rule 1.7(b). No reasonable lawyer could conclude that competent and diligent representation of both clients is possible. The proposed engagement contemplates the assertion of claims by one client against the other in the same proceeding before a tribunal, which Rule 1.7(b)(3) categorically prohibits. And the process of seeking consent would itself compromise the firm's confidentiality obligations to both clients.
The proposed MTDC engagement (Matter No. 1031-00001) must be declined. The General Counsel respectfully requests that the Conflicts Committee adopt the recommendations set forth in Section V and authorize their immediate implementation.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Helen Drazkowski
Title: General Counsel
Address: 600 Lexington Avenue, 38th Floor
New York, NY 10022
Date: May 14, 2024
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION This memorandum was prepared at the direction of the Conflicts Committee of Calderwood & Harkness LLP and is protected by the attorney-client privilege and the work-product doctrine. Distribution is limited to the individuals identified on the first page of this memorandum. Any unauthorized review, use, disclosure, or distribution is prohibited.
Financial Metric | Amount
Estimated foregone fees — proposed MTDC engagement (18–24 months) | $3,500,000 – $5,200,000
Annual billings from Pinnacle (FY 2023 actual, Matter No. 1031-00001) | $2,137,500
MTDC annual outside-counsel budget (all matters, all firms) | ~$14,800,000
MTDC estimated BIPA exposure — negligent violation floor | $12,400,000
MTDC estimated BIPA exposure — intentional violation ceiling | $62,000,000
Pinnacle–MTDC MSLA total contract value (5-year initial term) | $8,700,000
Pinnacle–MTDC MSLA annual contract value | $1,740,000
Amount billed to MTDC under Matter No. 1031-00001 to date | $0
Amount of disbursements recorded to Matter No. 1031-00001 to date | $0

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP

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