Attachments: - Conflicts Search Report — Round 1 (May 10, 2024) - Supplemental Conflicts Search Report — Round 2, Expanded Parties (May 13, 2024)
Dear Larry,
I am writing to formally request that the Conflicts Committee convene at its earliest availability to review and render a determination regarding a conflict of interest identified in connection with proposed new Matter No. 1031-00001. The conflict involves an existing firm client and appears to raise serious concerns under both Illinois Rules of Professional Conduct 1.7(a)(1) (direct adversity) and 1.7(a)(2) (material limitation). I have attached the Round 1 and Round 2 conflicts search reports for the Committee's review.
**I. Summary of the Proposed Engagement**
The prospective client is the Metropolitan Transit Development Corp. ("MTDC"), a unit of local government and special-purpose transit authority organized under the Illinois Local Mass Transit District Act, headquartered at 550 West Harrison Street, Suite 1400, Chicago, IL 60607. The principal MTDC contacts are Terrence Whitfield (General Counsel), Lucia Marchetti (CISO), and Darnell Okafor (Executive Director).
MTDC was referred to the firm by Constance Hargrove at Hargrove, Tillman & Reese LLP, MTDC's existing outside litigation counsel, who recommended Calderwood & Harkness specifically for our data-privacy and biometric-law expertise. I spoke with MTDC representatives by phone on May 6, 2024, and new-matter intake was opened on May 9, 2024.
The proposed scope of engagement encompasses the following:
1. **Defense of a Civil Investigative Demand.** The Illinois Attorney General's Bureau of Civil Rights issued a CID on April 22, 2024 (Reference No. CRB-2024-0417), alleging that MTDC's deployment of a biometric workforce-management platform violated the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seq., and the Illinois Personal Information Protection Act, 815 ILCS 530/1 et seq. The AG's office has designated Ridgeway & Falk LLP (Diane Falk) as outside special counsel for the enforcement proceedings.
2. **Defense of a putative employee class action.** A class action was filed on April 29, 2024, in the Circuit Court of Cook County, Chancery Division (Case No. 2024-CH-04417), brought on behalf of approximately 12,400 current and former MTDC employees through class counsel Kessler, Brandt & O'Neill LLP (Martin Kessler, Yolanda Brandt).
3. **Advice on remediation** of MTDC's biometric-data practices.
4. **Potential cross-claims and indemnification proceedings** against technology vendors — including, critically, Pinnacle Workforce Analytics, Inc. ("Pinnacle") — under the Master Software License and Services Agreement dated June 15, 2021 (the "MSLA").
5. **Related employment counseling** concerning workforce-monitoring policies.
The estimated fees are $3.5 million to $5.2 million over 18–24 months, at proposed rates of $1,150/hr (partner), $785/hr (senior associate), and $625/hr (junior associate). MTDC's annual outside-counsel budget is approximately $14.8 million. MTDC's estimated BIPA exposure ranges from $12.4 million (negligent violations: 12,400 class members × $1,000 statutory damages) to $62 million (intentional violations: 12,400 × $5,000).
The proposed engagement team would consist of myself as responsible partner, Miriam Calloway as billing partner, Devon Archer as lead associate, and Nadia Petrov as working associate.
**II. Identification of the Conflict — Pinnacle Workforce Analytics, Inc.**
The Round 1 conflicts search, run on May 9, 2024 and reported on May 10, 2024, identified that Calderwood & Harkness currently represents Pinnacle Workforce Analytics, Inc., a Delaware corporation headquartered at 11900 Sunrise Valley Drive, Suite 500, Reston, VA 20191.
Pinnacle is represented under existing Matter No. 1031-00001, opened March 14, 2022. The responsible and billing partner is Jonathan Mercer (Intellectual Property / Patent Litigation), and the lead associate is Priya Subramaniam. The representation involves patent-licensing and enforcement matters related to Pinnacle's flagship product, "TruScan 360," an AI-powered biometric timekeeping and scheduling platform. Specifically, the firm is prosecuting patent-infringement claims Pinnacle brought against Veritas Biometrics Corp. in the U.S. District Court for the Eastern District of Virginia (Case No. 1:22-cv-01533, filed September 6, 2022). Pinnacle's annual billings to the firm were approximately $2,137,500 in FY 2023.
The conflict is as follows: TruScan 360 is the same biometric workforce-management platform that MTDC deployed under the MSLA and that is at the center of both the AG's CID and the employee class action. Pinnacle is named as a "responsible party" in the AG's CID, and the AG has indicated it may name Pinnacle as a co-respondent. MTDC's anticipated cross-claims and indemnification demands under the MSLA would be asserted directly against Pinnacle. The MSLA has a total contract value of $8.7 million over five years ($1,740,000/yr), with an optional three-year renewal, running from June 15, 2021 through June 14, 2026.
**III. Nature and Severity of the Conflict**
The conflict implicates both prongs of Rule 1.7(a):
*Direct Adversity (Rule 1.7(a)(1)).* Representing MTDC would place the firm directly adverse to Pinnacle — an existing client — in a matter involving the very same technology platform (TruScan 360) that is the subject of the firm's current patent-enforcement work for Pinnacle.
*Material Limitation (Rule 1.7(a)(2)).* The MTDC engagement would require the firm to argue that TruScan 360's biometric-data collection, storage, and dissemination practices are unlawful under BIPA — a position that is fundamentally and irreconcilably inconsistent with our work for Pinnacle in the patent matter, which depends on establishing the legitimacy, innovation, and commercial value of TruScan 360's biometric capabilities.
*Confidential Information.* I communicated with Jonathan Mercer on May 10, 2024 regarding this issue. Jonathan confirmed that the firm possesses Pinnacle's confidential technical architecture information regarding TruScan 360, including source-code architecture summaries, data-flow diagrams, and biometric-data retention policies — information that would be directly relevant to the BIPA claims MTDC would assert against Pinnacle. This further heightens the severity of the conflict.
I also note that the Round 2 supplemental search, dated May 13, 2024, expanded the conflicts inquiry to Pinnacle affiliates and subcontractors, MTDC board members, Veritas Biometrics Corp., Lakefront Actuarial Advisors, LLC, and related individuals. That search confirmed no additional conflicts beyond the Pinnacle issue identified above.
**IV. Preliminary Assessment**
In my preliminary view, this conflict presents a serious obstacle to the firm's ability to undertake the MTDC representation. However, I respectfully defer to the Committee's formal analysis and determination regarding waivability under Illinois Rule 1.7(b).
I wish to emphasize that time sensitivity is significant. MTDC is facing active enforcement proceedings and a pending class action, and needs to engage counsel promptly.
**V. Requested Action**
I respectfully request that the Conflicts Committee convene as soon as practicable — ideally within the next one to two business days — to review this matter and render a determination. I am available to attend the Committee meeting and present additional details at the Committee's convenience. Jonathan Mercer has been made aware of this issue and is likewise available to participate.
Finally, I want to confirm for the record that I have not shared any Pinnacle confidential information with the proposed MTDC engagement team, and no substantive work has been commenced on the MTDC matter pending the Committee's review.
Thank you for your attention to this matter, Larry. Please let me know the Committee's availability, and do not hesitate to reach out if you need any additional information in advance of the meeting. I can be reached directly at (312) 555-4718.
Best regards,
Rachel Bernstein Partner Privacy & Data Security Practice Calderwood & Harkness LLP One North Wacker Drive, Suite 4200 Chicago, IL 60606 Direct: (312) 555-4718 rbernstein@calderwoodharkness.com