``` MIME-Version: 1.0 Content-Type: text/plain; charset="UTF-8" Content-Transfer-Encoding: 7bit From: Rachel Bernstein To: Lawrence Keating , Helen Drazkowski , Jonathan Mercer Cc: Colleen Farrow Date: Wed, 15 May 2024 09:14:00 -0500 Subject: RE: Conflicts Committee Determination -- Matter No. 1031-00001 (Metropolitan Transit Development Corp.) [PRIVILEGED AND CONFIDENTIAL] Message-ID: In-Reply-To: References:
PRIVILEGED AND CONFIDENTIAL -- ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION
Lawrence, Helen, Jonathan, and Colleen,
Thank you all for the Committee's thorough and careful handling of this matter. While I am naturally disappointed -- my team and I had invested significant time in scoping the engagement and believed we could add substantial value to MTDC's defense -- I fully understand and accept the Committee's determination. The firm's ethical obligations must take precedence, and the conflict here is clear.
I want to confirm that I will proceed with all assigned next steps as follows:
1. DECLINATION LETTER. I will circulate a draft declination letter to Helen for her review by close of business today, May 15. I will follow Helen's guidance precisely with respect to the parameters she outlined -- specifically, the letter will not identify the existing client by name, will not describe the nature of the existing engagement, and will state only that the firm has identified an unwaivable conflict of interest that prevents us from undertaking the representation. The letter will confirm that no attorney-client relationship was formed and will offer to facilitate referrals to qualified alternative counsel. I plan to send the final letter to Terrence Whitfield, General Counsel, Metropolitan Transit Development Corp., 550 West Harrison Street, Suite 1400, Chicago, IL 60607, no later than May 17, 2024, and will copy Constance Hargrove at Hargrove, Tillman & Reese LLP as the referring attorney and MTDC's existing outside counsel.
2. REFERRAL MEMORANDUM. Devon Archer and I are working on a referral memorandum identifying firms with strong BIPA defense practices. We have two primary candidates in mind at this time:
(a) Aldridge, Paulson & Cho LLP -- Victoria Aldridge, 150 North Michigan Avenue, Suite 3500, Chicago, IL 60601. Victoria's team has developed significant BIPA defense experience over the past several years and has handled matters involving biometric-data collection practices of comparable complexity.
(b) Northfield McKay LLP -- Damien Northfield, 311 South Wacker Drive, Suite 4800, Chicago, IL 60606. Damien leads a well-regarded data-privacy litigation practice with particular depth in Illinois regulatory and class-action defense work.
I plan to send a separate referral letter to Terrence Whitfield with these recommendations. With his permission, I would also like to give each firm a heads-up that MTDC may be reaching out, so that they can conduct their own conflicts checks promptly.
3. CONFIRMATION -- NO PINNACLE INFORMATION RECEIVED. I want to state affirmatively and for the record that neither I nor anyone on my proposed engagement team -- Miriam Calloway, Devon Archer, and Nadia Petrov -- received, reviewed, or had access to any Pinnacle Workforce Analytics confidential information at any point during the intake process. The only information my team reviewed consisted of (a) publicly available information about Pinnacle and TruScan 360, (b) the conflicts search reports generated by Colleen's team, and (c) the materials MTDC provided to us during the initial call on May 6, 2024. At no time did we request or obtain any information from Jonathan's team.
4. INTERNAL DECLINATION MEMORANDUM. I will prepare and circulate an internal declination memorandum to my team (Calloway, Archer, and Petrov) and firm leadership today, confirming the closure of the intake process and the return or destruction of any MTDC-provided intake materials as appropriate.
I do want to flag one practical concern for the group. MTDC faces very significant time pressure. The Illinois Attorney General's Civil Investigative Demand (Ref. CRB-2024-0417) was issued on April 22, 2024, and the employee class action (Cook County Case No. 2024-CH-04417) was filed on April 29, 2024. The putative class encompasses approximately 12,400 current and former employees, and MTDC's potential statutory damages exposure under BIPA Section 15 ranges from approximately $12.4 million for negligent violations to $62 million for intentional violations. Every day without engaged defense counsel on the BIPA matters is a day lost. I would like to ensure that we communicate our declination and referral recommendations as quickly as possible so that MTDC can engage replacement counsel without unnecessary delay. If Helen is able to turn comments on the draft declination letter quickly, I am prepared to finalize and send it as early as May 16.
Thank you again to Lawrence and the full Committee for the careful and principled handling of this determination. I appreciate the respect shown to all parties involved.
Best regards,
Rachel Bernstein Partner
PRIVILEGED AND CONFIDENTIAL -- ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION. This communication is intended solely for the named recipients. Do not forward, copy, or distribute without authorization.
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From: Helen Drazkowski Sent: Tuesday, May 14, 2024 6:28 PM CDT To: Lawrence Keating ; Jonathan Mercer ; Rachel Bernstein Cc: Colleen Farrow Subject: RE: Conflicts Committee Determination -- Matter No. 1031-00001 (Metropolitan Transit Development Corp.) [PRIVILEGED AND CONFIDENTIAL]
PRIVILEGED AND CONFIDENTIAL -- ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION
Lawrence, Jonathan, Rachel, and Colleen,
Thank you, Jonathan, for the prompt and thorough confirmation regarding the integrity of the confidential-information barriers. That is exactly what we need for the file.
I concur fully with the Committee's determination and want to address several items raised in this thread.
PINNACLE NOTIFICATION
Jonathan, to your question regarding whether we have an obligation to notify Pinnacle (Gregory Harmon / Sandra Yee) that a potentially adverse engagement was considered and declined: I have reviewed the applicable provisions of the Illinois Rules of Professional Conduct and confirm that no affirmative notification to Pinnacle is required. The firm's duty was to identify the conflict and decline the proposed engagement, and that duty has been discharged. There is no corresponding obligation under the Rules to inform an existing client that a potential adverse engagement was considered and rejected. I agree with your recommendation that no notification be made, as doing so would serve no protective purpose and could generate unnecessary concern on Pinnacle's part. That said, we should maintain a clean and comprehensive internal record of this determination and the steps taken, in case the question ever arises in any context.
GUIDANCE ON THE DECLINATION LETTER
Rachel, I would ask you to observe the following parameters in drafting the declination letter to Terrence Whitfield at MTDC:
1. The letter must not identify Pinnacle Workforce Analytics by name or by any description that would allow MTDC to identify the existing client.
2. The letter must not describe the nature of the existing engagement or the specific basis for the conflict determination.
3. The letter should state only that the firm has identified an unwaivable conflict of interest that prevents Calderwood Harkness from undertaking the representation.
4. The letter should expressly confirm that no attorney-client relationship was formed between the firm and MTDC.
5. The letter should offer to facilitate referrals to qualified alternative counsel with relevant expertise.
6. The letter should be copied to Constance Hargrove at Hargrove, Tillman & Reese LLP, as she was the referring attorney and MTDC's existing outside counsel.
Please keep the language precise and spare. We want to be courteous and professional, but we must not provide any information that could allow MTDC or its counsel to identify the source of the conflict.
TIMELINE
I would ask you to circulate a draft of the declination letter to me by end of day tomorrow, May 15, 2024. I will turn my review promptly. Our goal should be to deliver the final letter to MTDC no later than May 17, 2024. Given the pending CID response deadlines and the recently filed employee class action (Cook County Case No. 2024-CH-04417), MTDC will need to engage alternative counsel quickly, and a prompt declination is both a professional courtesy and a practical necessity.
JONATHAN'S INFORMATION-BARRIER MEMO
Jonathan, thank you for offering to provide a formal memo confirming the confidential-information-barrier integrity. I would like to accept that offer. Please send a brief memorandum to Colleen Farrow, copying me, for inclusion in the permanent conflicts file for Matter No. 1031-00001. A concise confirmation covering the points you outlined in your email below will be sufficient.
COLLEEN
Colleen, please begin preparing the conflicts database update and matter closure documentation for Matter No. 1031-00001 so that everything is ready to process as soon as the declination letter has been sent and acknowledged by MTDC. Please also ensure that the executed Conflicts Committee Resolution is filed in the permanent conflicts record.
Thank you all for the prompt and professional handling of this matter.
Best regards,
Helen Drazkowski General Counsel Calderwood Harkness LLP One North Wacker Drive, Suite 4200 Chicago, IL 60606 T: (312) 555-0134 hdrazkowski@calderwoodharkness.com
PRIVILEGED AND CONFIDENTIAL -- ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION. This communication is intended solely for the named recipients. Do not forward, copy, or distribute without authorization.
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From: Jonathan Mercer Sent: Tuesday, May 14, 2024 5:43 PM CDT To: Lawrence Keating ; Rachel Bernstein Cc: Helen Drazkowski ; Colleen Farrow Subject: RE: Conflicts Committee Determination -- Matter No. 1031-00001 (Metropolitan Transit Development Corp.) [PRIVILEGED AND CONFIDENTIAL]
PRIVILEGED AND CONFIDENTIAL -- ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION
Lawrence, Rachel, Helen, and Colleen,
Thank you for the Committee's prompt and thorough analysis. I agree fully with the determination that the firm must decline the proposed MTDC engagement, and I appreciate the care with which the Committee addressed the conflict.
CONFIDENTIAL INFORMATION CONFIRMATION
Per Lawrence's request, I want to confirm affirmatively and unequivocally that neither I nor anyone on my engagement team -- specifically including Priya Subramaniam, my lead associate on all Pinnacle matters -- shared any Pinnacle Workforce Analytics confidential information with Rachel Bernstein, Miriam Calloway, Devon Archer, or Nadia Petrov at any point during the MTDC intake process.
To be specific about what is at stake, the categories of Pinnacle confidential information in the firm's possession that are directly relevant to TruScan 360 include: technical specifications, source-code architecture summaries, data-flow diagrams, biometric-data retention policies, algorithm design documents, and patent-prosecution correspondence. These materials have remained at all times within the Pinnacle engagement team's access controls in the firm's document management system. No exceptions were made, and no access requests were received from Rachel's team or anyone outside the Pinnacle engagement group.
SENSITIVITY OF THE PINNACLE LITIGATION
I want to underscore for the record why this conflict was truly unwaivable. The Pinnacle v. Veritas Biometrics Corp. litigation (E.D. Va. Case No. 1:22-cv-01533) is currently in an active discovery phase. Our patent-enforcement arguments depend fundamentally on establishing TruScan 360's technical legitimacy -- that its biometric-data collection, processing, and analysis capabilities represent genuine innovation and have substantial commercial value. Were the firm to take a contrary position in any forum -- characterizing those same capabilities as unlawful under BIPA -- it would be devastating to Pinnacle's case and to the firm's credibility before Judge Callahan.
PINNACLE RELATIONSHIP
For context, Pinnacle's annual billings to the firm were approximately $2,137,500 in FY 2023. The client relationship has been active since 2019, spanning patent prosecution, patent enforcement, technology licensing, and regulatory advisory work. I have no reason to believe that Pinnacle -- specifically Gregory Harmon (CEO) or Sandra Yee (General Counsel) -- is aware that MTDC approached the firm. I would recommend that no notification to Pinnacle be made unless we are ethically required to do so, in order to avoid generating any unnecessary concern about the integrity of the firm's handling of their matters. I defer to Helen on the question of whether any ethical obligation to notify exists.
I am happy to provide a formal written memorandum confirming the information-barrier integrity for inclusion in the conflicts file if that would be useful.
Thank you again, Lawrence, and to the full Committee, for protecting both the firm's ethical standing and the Pinnacle relationship. This was the right call.
Best regards,
Jonathan Mercer Partner
PRIVILEGED AND CONFIDENTIAL -- ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION. This communication is intended solely for the named recipients. Do not forward, copy, or distribute without authorization.
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From: Lawrence Keating Sent: Tuesday, May 14, 2024 4:17 PM CDT To: Rachel Bernstein ; Jonathan Mercer Cc: Helen Drazkowski ; Colleen Farrow Subject: Conflicts Committee Determination -- Matter No. 1031-00001 (Metropolitan Transit Development Corp.) [PRIVILEGED AND CONFIDENTIAL]
PRIVILEGED AND CONFIDENTIAL -- ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION
Rachel, Jonathan, Helen, and Colleen,
I am writing to confirm that the Conflicts Committee met today, May 14, 2024, and reached a unanimous determination regarding the proposed engagement of Metropolitan Transit Development Corp. ("MTDC") under Matter No. 1031-00001. The following individuals were present for the Committee's deliberation: Lawrence Keating (Chair), Helen Drazkowski, Colleen Farrow, Rachel Bernstein, and Jonathan Mercer.
DETERMINATION
The Committee has determined that the firm must decline the proposed MTDC engagement due to an unwaivable conflict of interest with our existing client, Pinnacle Workforce Analytics, Inc. ("Pinnacle"), which is the subject of Matter No. 1031-00001.
BASIS FOR DETERMINATION
The Committee's determination rests on the following grounds:
1. Direct Adversity -- Illinois Rule of Professional Conduct 1.7(a)(1). Pinnacle is a named responsible party in the Illinois Attorney General's Civil Investigative Demand (Ref. CRB-2024-0417). MTDC's anticipated cross-claims and indemnification demands under the Master Software License and Services Agreement dated June 15, 2021, would be asserted directly against Pinnacle. Representing MTDC in these matters would place the firm in a position of direct adversity to an existing client.
2. Material Limitation -- Illinois Rule of Professional Conduct 1.7(a)(2). The proposed MTDC engagement would require the firm to characterize TruScan 360's biometric-data collection, storage, and dissemination practices as unlawful under the Illinois Biometric Information Privacy Act (740 ILCS 14/1 et seq.). This position is diametrically opposed to the legal positions the firm advances on Pinnacle's behalf in the patent-enforcement action, Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., E.D. Va. Case No. 1:22-cv-01533, in which the firm argues the legitimacy, innovation, and commercial value of TruScan 360's biometric capabilities. 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.
3. Waiver Unavailable -- Illinois Rule of Professional Conduct 1.7(b). The Committee has concluded that waiver is not available under Rule 1.7(b) because no reasonable lawyer could conclude that competent and diligent representation of both MTDC and Pinnacle is possible under these circumstances. The positions required are fundamentally irreconcilable.
FORMAL RESOLUTION
A written Conflicts Committee Resolution has been executed by all Committee members and will be maintained in the permanent conflicts file for Matter No. 1031-00001.
NEXT STEPS
I am assigning the following action items to ensure that this determination is implemented promptly and properly:
1. Rachel Bernstein: Please prepare the external declination communication to MTDC's General Counsel, Terrence Whitfield. Consult with Helen Drazkowski to ensure that the letter does not disclose the identity of the existing client or the nature of the existing engagement. The letter should be professional and courteous, but must be carefully circumscribed.
2. Rachel Bernstein: Please prepare a referral memorandum identifying qualified alternative counsel with BIPA expertise who may be able to assist MTDC. We owe a professional courtesy to a prospective client of this stature, and I want the referral to be thoughtful and useful.
3. Jonathan Mercer: Please confirm in writing that no Pinnacle confidential information was shared with the proposed MTDC engagement team -- specifically Rachel Bernstein, Miriam Calloway, Devon Archer, and Nadia Petrov -- at any point during the intake process. This confirmation should be provided to this group and will be maintained in the conflicts file.
4. Colleen Farrow: Please update the firm's conflicts database to reflect the Committee's determination and initiate the matter closure process for Matter No. 1031-00001 once the declination has been communicated to MTDC.
I want to thank all of you for your prompt attention to this matter and for the professionalism with which the Committee conducted its analysis. I recognize that this determination carries meaningful financial consequences for the firm -- the estimated foregone fees for the MTDC engagement were in the range of $3.5 million to $5.2 million. However, the firm's ethical obligations are paramount, and there was no path to accepting this engagement that would have been consistent with those obligations. I am confident that this is the right decision.
Given the stature of both the prospective client and our existing client, I ask that all aspects of this matter be handled with the utmost discretion and professionalism.
Regards,
Lawrence Keating Senior Partner
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