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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

To: Rachel Bernstein, Partner, Privacy & Data Security Devon Archer, Associate, Labor & Employment

From: Nadia Petrov, Associate, Labor & Employment

Date: May 13, 2024

Re: Ethics Analysis — Illinois Rule of Professional Conduct 1.9: Duties to Former Clients — Applicability to Proposed Representation of Metropolitan Transit Development Corp. (Matter No. 1031-00001) in Light of Existing Representation of Pinnacle Workforce Analytics, Inc. (Matter No. 1031-00001)

Prepared at the request of: Rachel Bernstein, in connection with the Conflicts Committee review scheduled for May 14, 2024

Superseded by / companion to: See companion memoranda addressing Illinois Rules 1.7 (Direct Adversity), 1.7(b) (Waivability Assessment), and 1.10 (Imputation)

I. Executive Summary

This memorandum addresses the applicability of Illinois Rule of Professional Conduct 1.9, governing the duties owed by lawyers to former clients, to the conflict that has arisen in connection with the proposed representation of Metropolitan Transit Development Corp. ("MTDC") in Matter No. 1031-00001. Specifically, the memorandum considers whether Rule 1.9 governs or constrains Calderwood & Harkness LLP's ability to undertake the MTDC engagement given the firm's existing attorney-client relationship with Pinnacle Workforce Analytics, Inc. ("Pinnacle") in Matter No. 1031-00001.

The primary conclusion of this memorandum is that Illinois Rule 1.9 does not apply to the present conflict analysis because Pinnacle is a current client of Calderwood & Harkness LLP, not a former client. The firm has continuously represented Pinnacle since the opening of Matter No. 1031-00001 on March 14, 2022. The active litigation in Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., No. 1:22-cv-01533 (E.D. Va.), filed September 6, 2022, remains pending and is handled by Jonathan Mercer (responsible partner) and Priya Subramaniam (lead associate). No termination event has occurred, and no withdrawal has been filed. Accordingly, the governing rule for the current conflict is Illinois Rule 1.7 (concurrent conflicts of interest), which imposes stricter requirements than Rule 1.9 and is the subject of separate companion memoranda.

However, for completeness — and to anticipate any future scenario in which the Pinnacle relationship terminates before the proposed MTDC matter is resolved or otherwise reconsidered — this memorandum provides a full hypothetical analysis of Rule 1.9's application. The conclusion of that hypothetical analysis is that even if Pinnacle were treated as a former client, Rule 1.9 would independently bar the proposed MTDC representation for two reinforcing reasons:

First, the matters are "substantially related" within the meaning of Rule 1.9(a). Both the existing Pinnacle engagement and the proposed MTDC engagement center on the same technology platform — Pinnacle's TruScan 360 biometric workforce-management system — and involve the same categories of biometric data (fingerprint, facial-geometry, and iris-scan), the same data-collection architecture, and the same data-handling and retention practices. The overlap is not incidental; it is foundational.

Second, Calderwood & Harkness acquired confidential information from Pinnacle — including technical specifications of TruScan 360's biometric-recognition algorithms, source-code architecture summaries, data-flow diagrams, and biometric-data retention policies — that is directly material to the BIPA enforcement action and employee class action at the core of the proposed MTDC engagement. Rule 1.9(c) would independently prohibit the use or disclosure of this information to Pinnacle's disadvantage.

Taken together, these conclusions reinforce the analysis set forth in the companion Rule 1.7 memoranda: the firm cannot represent MTDC in this matter regardless of whether the Pinnacle relationship is characterized as current or former. The conflict is structural, pervasive, and, as a practical matter, unwaivable.

This memorandum is submitted for inclusion in the materials to be considered by the Conflicts Committee at its meeting on May 14, 2024.

II. Background Facts Relevant to This Analysis

The following background facts are drawn from the firm's conflicts-clearance files, the new-matter intake form for Matter No. 1031-00001, the engagement file for Matter No. 1031-00001, and communications with relevant attorneys within the firm. The facts are presented in the detail necessary for the Conflicts Committee to evaluate the Rule 1.9 analysis and are organized around the two client relationships that give rise to the conflict.

A. The Existing Pinnacle Engagement (Matter No. 1031-00001)

Calderwood & Harkness opened Matter No. 1031-00001 on March 14, 2022. Jonathan Mercer serves as the responsible and billing partner. The engagement was originated by Mr. Mercer following a referral from a former colleague at Pinnacle's prior outside counsel, Davis Thornton LLP. Priya Subramaniam serves as lead associate, with additional staffing from associates and paralegals in the firm's intellectual Property and Technology Transactions practice groups.

The engagement concerns patent-licensing and enforcement matters related to Pinnacle's flagship biometric workforce-management product, TruScan 360. TruScan 360 is an AI-powered timekeeping and scheduling platform that uses fingerprint, facial-geometry, and iris-scan data to authenticate employee identity and manage workforce scheduling and payroll integration. The platform is deployed by a broad range of public- and private-sector clients across the United States, including transit authorities, healthcare systems, manufacturing companies, and government agencies. It is the primary revenue-generating product for Pinnacle, and the company's market position rests substantially on the proprietary biometric-recognition algorithms that underlie TruScan 360's authentication capabilities.

The active litigation within this engagement is Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., filed on September 6, 2022, in the United States District Court for the Eastern District of Virginia, Case No. 1:22-cv-01533. The case involves patent-infringement claims concerning TruScan 360's core biometric-recognition algorithms. Pinnacle alleges that Veritas Biometrics Corp. developed and marketed a competing biometric-authentication product that infringes on several of Pinnacle's utility patents covering multi-modal biometric fusion, liveness-detection protocols, and encrypted biometric-template storage. The case is in active discovery, with fact discovery not yet closed and dispositive motions anticipated. Calderwood & Harkness's work in this matter has required extensive engagement with TruScan 360's technical architecture, including review of source code, data-flow documentation, and algorithm design materials.

Pinnacle Workforce Analytics, Inc. is a Delaware corporation headquartered at 11900 Sunrise Valley Drive, Suite 500, Reston, Virginia 20191. The company's Chief Executive Officer is Gregory Harmon, and its General Counsel is Sandra Yee. Pinnacle's annual revenues are approximately $485 million, with a significant portion attributable to recurring software-licensing and services revenue from TruScan 360 deployments. The company has approximately 1,600 employees and maintains a portfolio of 47 issued U.S. utility patents and 12 pending patent applications, the majority of which relate to biometric-authentication technology.

Calderwood & Harkness's actual billings from Pinnacle for fiscal year 2023 totaled $2,137,500. This figure reflects a substantial ongoing engagement, though it does not place Pinnacle among the firm's top-ten revenue-producing clients. The engagement is ongoing, with no indication of imminent termination. Sandra Yee has been in regular contact with Jonathan Mercer regarding case strategy and upcoming discovery deadlines, most recently in a telephone conference on May 8, 2024.

B. The Proposed MTDC Engagement (Matter No. 1031-00001)

Metropolitan Transit Development Corp. ("MTDC") is 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.). MTDC is headquartered at 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. It operates the regional mass-transit system serving the greater Chicago metropolitan area and portions of surrounding counties, with an annual ridership of approximately 215 million trips and a workforce of approximately 12,400 current employees, supplemented by approximately 3,800 former employees who separated from service within the relevant statutory period. MTDC's General Counsel is Terrence Whitfield; its Chief Information Security Officer is Lucia Marchetti; and its Executive Director is Darnell Okafor.

MTDC first approached Calderwood & Harkness on May 6, 2024, through an initial telephone call between Rachel Bernstein and Constance Hargrove of Hargrove, Tillman & Reese LLP. Hargrove, Tillman & Reese serves as MTDC's existing outside litigation counsel for general commercial and government-contracts matters, but the firm lacked the specialized expertise in biometric-privacy law and BIPA compliance required to handle the matters now confronting MTDC. Constance Hargrove identified Calderwood & Harkness's Privacy & Data Security group as having the requisite capabilities and referred MTDC accordingly. A new-matter intake was opened on May 9, 2024, under Matter No. 1031-00001, with Rachel Bernstein designated as the responsible partner and Nadia Petrov and Devon Archer identified as potential staffing from the Labor & Employment group.

The proposed scope of the MTDC engagement encompasses five interrelated workstreams:

(a) Defense of the Illinois Attorney General's Civil Investigative Demand. On April 22, 2024, the Consumer Rights Bureau of the Illinois Attorney General's Office issued a Civil Investigative Demand to MTDC, Reference No. CRB-2024-0417, alleging violations of the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seq., arising from MTDC's deployment of TruScan 360 for employee timekeeping and scheduling purposes. The CID demands production of extensive documentation concerning MTDC's biometric-data collection, consent, retention, and destruction practices, as well as all agreements and communications with technology vendors — including Pinnacle — relating to biometric-data processing.

(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, Illinois, Chancery Division, Case No. 2024-CH-04417, on behalf of a class of approximately 12,400 current and former MTDC employees. The complaint alleges that MTDC violated multiple provisions of BIPA by, among other things, collecting employees' fingerprint, facial-geometry, and iris-scan data through TruScan 360 without providing the written notice and obtaining the written consent required by Section 15(b) of BIPA, and by failing to establish and comply with a publicly available retention schedule and destruction protocol as required by Section 15(a).

(c) Remediation Advice. MTDC seeks counsel regarding the remediation of its biometric-data practices to achieve BIPA compliance going forward, including the implementation of compliant notice-and-consent protocols, the establishment of a retention and destruction schedule, and the potential replacement or reconfiguration of TruScan 360 or migration to an alternative platform.

(d) Cross-Claims and Indemnification Proceedings. MTDC anticipates asserting cross-claims and indemnification demands against its technology vendors — principally Pinnacle — 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 (through June 14, 2026) and contains representations, warranties, and indemnification provisions relating to the legal compliance of TruScan 360's data-handling practices. MTDC's position is that Pinnacle bore contractual responsibility for ensuring that TruScan 360's biometric-data features complied with applicable law, including BIPA, and that Pinnacle should be required to indemnify and hold MTDC harmless for any liability, damages, costs, and expenses arising from the alleged BIPA violations.

(e) Related Employment Counseling. MTDC also seeks ongoing employment-law counseling related to the workforce implications of the biometric-data controversy, including employee communications, potential disciplinary or grievance proceedings under applicable collective-bargaining agreements, and coordination with the transit authority's human-resources department regarding modifications to timekeeping and scheduling protocols.

MTDC's total BIPA exposure has been estimated at between $12,400,000 (if all 12,400 class members recover the minimum statutory damages of $1,000 per violation for negligent violations under Section 20(1)) and $62,000,000 (if all class members recover the maximum statutory damages of $5,000 per violation for intentional or reckless violations under Section 20(2)). These figures do not account for potential penalties or injunctive relief arising from the Attorney General's investigation, which could be substantial.

The estimated fees for the proposed MTDC engagement are $3.5 million to $5.2 million over an anticipated 18- to 24-month engagement period, reflecting the multi-front litigation, the regulatory-investigation defense, the remediation workstream, and the cross-claim and indemnification component. This would represent a significant new engagement for the firm and a material contribution to annual revenues.

C. The Conflict

The conflict between the two representations is direct, structural, and multi-dimensional. Several features of the conflict bear emphasis for purposes of the Rule 1.9 analysis:

Direct adversity regarding TruScan 360. The proposed MTDC engagement would require Calderwood & Harkness to argue that TruScan 360's biometric-data collection, storage, and dissemination practices violated BIPA — a position that is directly adverse to Pinnacle's interests. Pinnacle's business model, patent portfolio, and market position depend on the legitimacy and lawful operation of TruScan 360. Any judicial or regulatory finding that TruScan 360's core data-handling practices violate BIPA would have devastating consequences for Pinnacle, including potential exposure to class-action liability from other TruScan 360 deployments across the country, diminution in the value of Pinnacle's patent portfolio, and reputational harm in its core market.

Pinnacle as a named responsible party and likely cross-claim target. Pinnacle is identified as a responsible party in the Attorney General's CID (Ref. CRB-2024-0417), and the AG's office has indicated that it may name Pinnacle as a co-respondent in any subsequent enforcement action. More significantly, MTDC's anticipated cross-claims and indemnification demands under the MSLA would be asserted directly against Pinnacle, potentially exposing Pinnacle to the full range of MTDC's statutory-damages liability.

Fundamentally inconsistent legal positions. The patent-enforcement matter on behalf of Pinnacle — Pinnacle v. Veritas Biometrics Corp. — depends on establishing the legitimacy, innovation, and commercial value of TruScan 360's biometric capabilities. The claims asserted in that case rest on the premise that TruScan 360's biometric-recognition algorithms represent a significant technological advance that is entitled to patent protection. The proposed MTDC engagement would require the firm to characterize those same capabilities as unlawful surveillance tools that violate employees' biometric-privacy rights under BIPA. These positions are not merely in tension; they are diametrically opposed and fundamentally irreconcilable.

Confidential information exposure. Calderwood & Harkness's work on behalf of Pinnacle in the patent-enforcement matter has required the firm's attorneys to develop detailed, intimate knowledge of TruScan 360's technical architecture, data-handling protocols, source-code structure, and biometric-data retention and destruction practices. This information is directly relevant — indeed, central — to the BIPA claims and defenses at the core of the proposed MTDC engagement. The risk of inadvertent or subconscious use of Pinnacle's confidential information in the MTDC matter is not speculative; it is inherent in the nature of the overlapping subject matter.

III. Text and Requirements of Illinois Rule 1.9

Before proceeding to the substantive analysis, this Section sets forth the text of the relevant provisions of Illinois Rule of Professional Conduct 1.9 and identifies the key elements that govern the analysis.

A. Rule 1.9(a) — Substantially Related Matter

The full text of Illinois Rule 1.9(a) provides:

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 1.9(a) thus establishes four key elements, each of which must be addressed in any analysis of a potential former-client conflict:

(1) Former-client relationship. The rule applies only where the lawyer "has formerly represented a client." This threshold requirement distinguishes Rule 1.9 from Rule 1.7, which governs concurrent conflicts. The existence of a former-client relationship presupposes that an attorney-client relationship was established and has since ended. A client whose engagement is ongoing is not a "former client" within the meaning of Rule 1.9.

(2) Same or substantially related matter. The proposed new representation must involve "the same or a substantially related matter." The "substantially related" standard is the subject of extensive case law and is discussed in detail in Section V.A below. The standard is designed to protect against the risk that confidential information gained in the prior representation could be used to the former client's disadvantage in a new matter.

(3) Materially adverse interests. The interests of the new client must be "materially adverse to the interests of the former client." This element requires more than a theoretical tension between the two clients' positions; there must be a concrete, material conflict between their respective interests in the matters at issue.

(4) Informed consent as a potential cure. The prohibition may be overcome if the former client "gives informed consent, confirmed in writing." Unlike Rule 1.7(b), Rule 1.9(a) does not expressly require that a reasonable lawyer must believe that competent and diligent representation of the new client is possible before seeking consent. However, as discussed in Section V.D below, practical limitations on the effectiveness of consent may render this mechanism unavailable in circumstances involving extensive confidential-information exposure.

B. Rule 1.9(c) — Confidential Information

The full text of Illinois Rule 1.9(c) provides:

A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:

(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or

(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.

Rule 1.9(c) establishes an independent prohibition that operates in tandem with, but separately from, the "substantially related matter" restriction of Rule 1.9(a). Its key features include:

Independent applicability. Rule 1.9(c) prohibits the use or disclosure of former-client confidential information regardless of whether the new representation would otherwise be permissible under Rule 1.9(a). In other words, even if the matters were not "substantially related" and informed consent had been obtained, the firm could not use or reveal Pinnacle's confidential information in the course of representing MTDC.

Breadth of coverage. The rule covers all "information relating to the representation," a phrase that is interpreted broadly to encompass not only information protected by the attorney-client privilege but also any information gained during or relating to the representation, including work-product materials, strategy discussions, business information, and technical data shared in the course of the engagement.

Two distinct prohibitions. Rule 1.9(c)(1) prohibits use of the information to the former client's disadvantage; Rule 1.9(c)(2) prohibits revelation of the information. These are separate prohibitions, and either may be violated independently of the other.

Limited exceptions. The prohibition on use admits an exception for information that "has become generally known," but this exception is narrowly construed. Information does not become "generally known" merely because it is theoretically accessible through public records or could be discovered through independent investigation; it must have been widely disseminated to the relevant public. The technical specifications, source-code architecture, data-flow diagrams, and retention policies at issue here are emphatically not "generally known."

IV. Threshold Determination: Rule 1.9 Does Not Apply — Pinnacle Is a Current Client

A. Status of the Pinnacle Relationship

The threshold question in any Rule 1.9 analysis is whether the client in question is, in fact, a "former" client. That threshold is not met here.

Matter No. 1031-00001 remains open and active in the firm's matter-management system. The engagement has been continuously active since its opening on March 14, 2022. Jonathan Mercer, the responsible partner, confirmed the ongoing status of the engagement in an email to Rachel Bernstein dated May 10, 2024, in which he stated: "The Pinnacle engagement is fully active. We are in the midst of discovery in the Veritas case, with expert depositions scheduled for July and a potential Markman hearing in September. I have been in regular contact with Sandra Yee, most recently on May 8. There is no indication whatsoever that Pinnacle is considering termination of our services."

The patent-enforcement litigation — Pinnacle v. Veritas Biometrics Corp., E.D. Va. Case No. 1:22-cv-01533 — is ongoing. Fact discovery is in progress, dispositive motions are anticipated, and substantial work remains to be performed. No termination of the engagement has been communicated by Pinnacle's General Counsel, Sandra Yee, or its Chief Executive Officer, Gregory Harmon. No engagement letter provision operates to terminate the relationship automatically upon the occurrence of any specified event or the passage of any specified period. No motion to withdraw as counsel of record has been filed or contemplated. The firm continues to bill for services rendered, and Pinnacle continues to pay invoices in the ordinary course.

In short, the Pinnacle engagement is in every relevant respect an active, ongoing attorney-client relationship. There is no basis for treating Pinnacle as a former client.

B. Current-Client Analysis Governed by Rule 1.7, Not Rule 1.9

Because Pinnacle is a current client of Calderwood & Harkness, the applicable rule for analyzing the conflict presented by the proposed MTDC engagement is Illinois Rule of Professional Conduct 1.7, which governs concurrent conflicts of interest. Rule 1.7 imposes stricter obligations on the firm than Rule 1.9 in several material respects.

Under Rule 1.7, the firm must analyze both direct adversity under Rule 1.7(a)(1) — whether the representation of MTDC would be "directly adverse" to Pinnacle — and material limitation under Rule 1.7(a)(2) — whether there is a significant risk that the representation of MTDC would be "materially limited" by the firm's responsibilities to Pinnacle. These analyses are the subject of the companion memorandum on Illinois Rule 1.7 (Direct Adversity).

Additionally, the consent-based waiver mechanism under Rule 1.7(b) is more demanding than the consent mechanism under Rule 1.9(a). Rule 1.7(b) requires, as a threshold condition, that "the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client." This threshold must be satisfied before consent is sought; it is not a question submitted to the clients' judgment but rather a determination that the lawyer must make independently. The companion memorandum on Illinois Rule 1.7(b) (Waivability Assessment) concludes that this threshold cannot be met in the present circumstances.

Rule 1.9 is designed to serve a different function. It operates as a residual protection for clients whose attorney-client relationships with a firm have ended. Its purpose is to ensure that the former client's interests and confidential information continue to receive meaningful protection even after the concurrent-client protections of Rule 1.7 no longer apply. By design, Rule 1.9's requirements are somewhat less stringent than those of Rule 1.7 — reflecting the reality that the duties owed to a former client, while significant, are not as comprehensive as those owed to a current client. Where the client relationship remains active, however, Rule 1.7 governs, and Rule 1.9 has no independent work to do.

C. Conclusion on Threshold Issue

Rule 1.9 is inapplicable to the current conflict. Pinnacle is a current client of Calderwood & Harkness, and the concurrent-conflict provisions of Illinois Rule 1.7 govern the analysis.

The analysis that follows in Section V is presented solely for completeness and to address the hypothetical scenario in which the Pinnacle relationship terminates — whether through the natural conclusion of the Veritas litigation, a decision by Pinnacle to engage other counsel, or any other circumstance — before the proposed MTDC matter is resolved or otherwise reconsidered. The Conflicts Committee should be aware that, as demonstrated below, the conflict does not dissipate if the Pinnacle engagement ends; it persists as a former-client conflict under Rule 1.9.

V. Hypothetical Analysis: If Pinnacle Were a Former Client

For the reasons stated in Section IV, this analysis is presented as a hypothetical exercise. It assumes, solely for purposes of analysis, that the Pinnacle engagement has concluded and that Pinnacle has become a former client of Calderwood & Harkness at some point prior to the commencement of the proposed MTDC representation. Under this assumption, the question becomes whether the proposed MTDC representation would be permissible under Rule 1.9.

The answer is no. As set forth below, the proposed MTDC representation would be barred under both Rule 1.9(a) (because the matters are substantially related and MTDC's interests are materially adverse to Pinnacle's) and Rule 1.9(c) (because the firm possesses Pinnacle confidential information that is material to the MTDC engagement and could not be used without disadvantaging Pinnacle).

A. Would the Matters Be "Substantially Related"?

1. Legal Standard for "Substantial Relationship"

Illinois courts apply a well-established three-part test to determine whether two matters are "substantially related" within the meaning of Rule 1.9(a):

(i) Determine the nature and scope of the prior representation. The court examines what the lawyer did in the prior engagement — the factual and legal issues involved, the types of information exchanged, and the breadth of the attorney's involvement.

(ii) Determine the nature of the present proposed representation. The court then examines the proposed new engagement — its factual and legal issues, the claims and defenses involved, and the information that would be material to the representation.

(iii) Assess whether it is reasonable to infer that confidential information gained in the prior representation would be material to the present matter. This is the critical analytical step. The court does not require proof that specific confidential information was actually disclosed or that the lawyer intends to use it. Instead, the test asks whether, given the nature and scope of the prior representation, it is reasonable to infer that the lawyer acquired confidential information that would be relevant and useful in the new matter.

This framework has been articulated and applied in numerous Illinois decisions. See, e.g., Schwartz v. Cortelloni, 177 Ill. 2d 166, 176 (1997) (describing the "substantial relationship" test and its purpose of protecting against the risk that confidential information from a prior representation will be used against a former client); LaSalle National Bank v. County of Lake, 703 F.2d 252, 255-56 (7th Cir. 1983) (applying the substantial-relationship test and noting that the inquiry focuses on the realistic likelihood that confidences were exchanged, not on whether the attorney can demonstrate that no confidences were shared).

The "substantial relationship" test does not require that the two matters be identical or that the same causes of action be involved. It is sufficient that the factual bases of the two representations are significantly overlapping or intertwined such that confidential information from the first would be relevant and useful in the second. See Comment [3] to Illinois Rule 1.9 ("Matters are 'substantially related' for purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter."). The test is intentionally protective, reflecting the policy judgment that former clients should not be placed in the position of having to demonstrate the precise contours of confidential information they shared with their former lawyer.

2. Application to the Pinnacle/MTDC Matters

Applying the three-part test to the facts of this case yields a clear conclusion: the matters are substantially related.

Step (i): Nature and scope of the prior representation (hypothetical). The Calderwood & Harkness engagement on behalf of Pinnacle (Matter No. 1031-00001) centers on patent-enforcement litigation concerning TruScan 360's core biometric-recognition algorithms. The firm's work in this engagement has involved — and necessarily required — a detailed and intimate understanding of TruScan 360's technical architecture. Specifically, the firm's attorneys have reviewed and analyzed:

• The technical specifications of TruScan 360's biometric-recognition algorithms, including the multi-modal biometric-fusion methodology, liveness-detection protocols, and encrypted biometric-template storage mechanisms;

• Source-code architecture summaries provided by Pinnacle's engineering team under the terms of a protective order;

• Data-flow diagrams documenting how biometric data (fingerprint templates, facial-geometry measurements, and iris-scan patterns) is collected at the point of employee authentication, processed through TruScan 360's algorithmic pipeline, transmitted to centralized and distributed data stores, and ultimately stored and retained;

• Pinnacle's biometric-data retention policies, including the duration for which biometric templates are retained, the geographic and logical locations where they are stored, and the protocols for eventual destruction;

• Algorithm design documents reflecting the research-and-development choices that underlie TruScan 360's biometric-authentication capabilities; and

• Patent-prosecution correspondence relating to the prosecution of Pinnacle's utility-patent portfolio before the United States Patent and Trademark Office.

This is not a case where the prior representation involved tangential or incidental contact with the subject matter at issue. The entire purpose of the Pinnacle engagement was to understand, document, and defend TruScan 360's biometric capabilities at the deepest technical level. The firm's attorneys have spent more than two years immersed in the inner workings of the very platform that is now at the center of MTDC's legal crisis.

Step (ii): Nature of the proposed representation. The proposed MTDC engagement centers on the defense of BIPA enforcement proceedings — both the Attorney General's CID and the employee class action — alleging that TruScan 360's biometric-data collection, storage, and dissemination practices violated Illinois law. The engagement also encompasses remediation advice concerning MTDC's biometric-data practices and, critically, the assertion of cross-claims and indemnification demands against Pinnacle under the MSLA. Each of these workstreams is directly and materially connected to TruScan 360's data-handling architecture and practices.

The BIPA claims against MTDC turn on specific factual questions about how TruScan 360 operates: What biometric data does the platform collect? How is that data processed and stored? Does the platform provide the notice required by BIPA Section 15(b)? Does the platform's data-retention architecture comply with the retention-schedule requirements of BIPA Section 15(a)? How and when are biometric templates destroyed? These are precisely the same factual questions that Calderwood & Harkness has spent more than two years investigating and analyzing in the context of the Pinnacle patent-enforcement litigation.

The cross-claims and indemnification demands against Pinnacle would require the firm to take the further step of asserting that Pinnacle bore responsibility for TruScan 360's alleged BIPA violations — that Pinnacle designed and deployed a platform whose biometric-data practices were not merely deficient but unlawful, and that MTDC is entitled to full indemnification under the MSLA for any resulting liability.

Step (iii): Reasonable inference of material confidential information. Given the nature and scope of the Pinnacle engagement, it is not merely reasonable to infer that Calderwood & Harkness acquired confidential information material to the MTDC matter — it is unavoidable. The firm possesses detailed knowledge of TruScan 360's technical architecture, data-handling protocols, retention practices, and algorithm design, all of which are directly relevant to the BIPA claims and defenses at the core of the MTDC engagement. There is no realistic scenario in which the firm's attorneys could represent MTDC in this matter without drawing on — consciously or unconsciously — the institutional knowledge acquired through the Pinnacle engagement.

Conclusion on substantial relationship. The matters are substantially related within the meaning of Rule 1.9(a). The connection between the two representations is not incidental, attenuated, or tangential. It is direct, pervasive, and foundational. Both matters center on the same technology platform (TruScan 360), the same categories of biometric data (fingerprint, facial-geometry, iris-scan), and the same data-collection, processing, storage, and retention architecture. The patent-enforcement matter requires demonstrating the legitimacy and innovativeness of TruScan 360's design; the MTDC matter would require challenging the legality of those same design features under BIPA. The factual nexus is as close as it can be without the matters being literally identical.

B. Would Interests Be "Materially Adverse"?

1. Legal Standard

The "materially adverse" element of Rule 1.9(a) is satisfied when the proposed representation involves asserting claims, defenses, or legal positions that would be harmful to the former client's legal, financial, or business interests. Material adversity does not require that the new representation involve direct litigation against the former client, though that circumstance plainly satisfies the standard. It is sufficient that the new representation would require the firm to take positions, advance arguments, or pursue outcomes that would be detrimental to the former client. See Comment [1] to Illinois Rule 1.9 (noting that the rule's protections extend to situations in which the former client's interests could be injured by the lawyer's involvement in a substantially related matter, even absent direct adversarial proceedings).

2. Application. The proposed MTDC engagement would be materially adverse to Pinnacle's interests in multiple, reinforcing respects:

Characterization of TruScan 360 as unlawful. The most fundamental source of adversity is the legal characterization that the MTDC engagement would require Calderwood & Harkness to advance. The firm would be required to argue — in regulatory proceedings, in class-action litigation, and potentially in cross-claim proceedings — that TruScan 360's biometric-data practices violated BIPA (740 ILCS 14/1 et seq.) and potentially the Illinois Personal Information Protection Act (815 ILCS 530/1 et seq.). This characterization would directly undermine Pinnacle's commercial position, the value of its patent portfolio, and its competitive standing in the biometric workforce-management market. A finding that TruScan 360's core data-handling features violate BIPA would have repercussions far beyond the MTDC matter, potentially exposing Pinnacle to liability from other TruScan 360 deployments and jeopardizing its relationships with existing and prospective customers.

Pinnacle as a named party in the Attorney General's investigation. Pinnacle is identified as a responsible party in the Attorney General's CID (Reference No. CRB-2024-0417), and the AG's office has indicated that it may name Pinnacle as a co-respondent in any subsequent enforcement action. Calderwood & Harkness's involvement in the defense of MTDC would place the firm in the position of cooperating with an investigation that could result in enforcement proceedings against its own (hypothetical former) client — a deeply compromised posture.

Cross-claims and indemnification demands against Pinnacle. Perhaps most directly, MTDC's anticipated cross-claims and indemnification demands under the MSLA would be asserted against Pinnacle. The MSLA, dated June 15, 2021, with a total contract value of $8,700,000 over a five-year initial term through June 14, 2026, contains representations and warranties by Pinnacle regarding the legal compliance of TruScan 360's data-handling practices, as well as indemnification provisions that MTDC believes obligate Pinnacle to hold MTDC harmless for BIPA-related liabilities. MTDC's statutory-damages exposure ranges from $12.4 million to $62 million; under the indemnification provisions, MTDC would seek to shift that entire exposure — plus attorneys' fees, costs, and related expenses — to Pinnacle.

Undermining the patent-enforcement litigation. The positions that the firm would be required to take in the MTDC engagement are fundamentally inconsistent with the positions the firm has taken and is taking in the Veritas patent-enforcement litigation. In the Veritas case, Calderwood & Harkness has argued that TruScan 360's biometric-recognition algorithms represent a significant technological innovation — that the platform's multi-modal biometric-fusion methodology, liveness-detection protocols, and encrypted template-storage architecture are novel, non-obvious, and commercially valuable. In the MTDC engagement, the firm would be required to characterize those same features as instruments of unlawful biometric surveillance. These positions cannot coexist in the mouth of the same law firm without fundamentally compromising the credibility and effectiveness of both representations.

Conclusion on material adversity. MTDC's interests are materially adverse to Pinnacle's interests in every meaningful sense. The adversity is direct (cross-claims and indemnification demands), positional (diametrically opposed characterizations of TruScan 360), regulatory (cooperation with an AG investigation that may target Pinnacle), and economic (potential exposure of Pinnacle to tens of millions of dollars in liability). The material-adversity element of Rule 1.9(a) is clearly satisfied.

C. Confidential Information Analysis Under Rule 1.9(c)

1. Categories of Confidential Information Acquired

Even apart from the "substantially related matter" analysis under Rule 1.9(a), Rule 1.9(c) provides an independent basis for concluding that the proposed MTDC representation would be impermissible. The firm's possession of Pinnacle's confidential information — and the impossibility of undertaking the MTDC engagement without at least the risk of using that information to Pinnacle's disadvantage — compels this conclusion.

Per the Confidential Information Inventory prepared by Jonathan Mercer's team (principally Priya Subramaniam, lead associate on the Pinnacle engagement), Calderwood & Harkness possesses the following categories of Pinnacle confidential information relevant to TruScan 360:

(a) Technical specifications of TruScan 360's biometric-recognition algorithms. This includes detailed documentation of the multi-modal biometric-fusion methodology employed by TruScan 360, the platform's liveness-detection protocols, and the algorithmic processes by which biometric data is captured, converted into biometric templates, matched against stored templates, and validated. This information was provided by Pinnacle's engineering team to support the patent-infringement claims in the Veritas litigation and is subject to the protective order entered in that case.

(b) Source-code architecture summaries. The firm has reviewed and analyzed summaries of TruScan 360's source-code architecture, including the structure of the platform's authentication engine, the interface between the biometric-capture modules and the centralized matching server, and the cryptographic protocols used to protect biometric templates in transit and at rest. While the firm does not possess the full source code, the architectural summaries provide a comprehensive understanding of the platform's design and operation.

(c) Data-flow diagrams. Pinnacle provided Calderwood & Harkness with detailed data-flow diagrams documenting the end-to-end lifecycle of biometric data within the TruScan 360 ecosystem — from the point of initial capture at a biometric terminal, through transmission to the authentication server, processing by the matching engine, storage in the biometric-template database, and eventual destruction (or non-destruction, as the case may be) pursuant to Pinnacle's retention policies. These diagrams are central to understanding how TruScan 360 handles the very categories of biometric data (fingerprint, facial-geometry, iris-scan) at issue in the BIPA claims.

(d) Biometric-data retention policies. The firm has detailed knowledge of Pinnacle's biometric-data retention policies, including the duration for which biometric templates are retained following employee separation, the geographic and logical storage locations, and the protocols (if any) for destruction of biometric data at the end of the retention period. This information is directly material to the BIPA claims, which turn in part on whether TruScan 360 and its deploying organizations comply with BIPA Section 15(a)'s requirement for a publicly available retention schedule and destruction protocol.

(e) Algorithm design documents. Calderwood & Harkness has reviewed internal Pinnacle design documents reflecting the research-and-development choices that underlie TruScan 360's biometric-authentication capabilities, including documents reflecting Pinnacle's awareness of (and decisions regarding) the trade-offs between biometric-data accuracy, processing speed, and privacy protections.

(f) Patent-prosecution correspondence. The firm possesses correspondence between Pinnacle and the United States Patent and Trademark Office relating to the prosecution of Pinnacle's utility-patent portfolio, including office actions, responses, and claim amendments. While some of this correspondence is part of the public prosecution history, significant portions contain confidential information regarding Pinnacle's patent strategy, claim-scope decisions, and assessments of prior art.

2. Materiality to the MTDC Matter

Each of the above categories of confidential information is directly material to the claims and defenses at the heart of the proposed MTDC engagement.

The core of the BIPA claims against MTDC concerns whether TruScan 360 collected and stored biometric data in compliance with the statutory requirements of notice, consent, retention schedules, and data-destruction obligations under 740 ILCS 14/15. To build a defense — and, more pointedly, to construct cross-claims and indemnification demands against Pinnacle — MTDC's counsel would need precisely the kind of technical understanding of TruScan 360's data-handling architecture that Calderwood & Harkness has already acquired through the Pinnacle engagement.

Knowledge of TruScan 360's data-flow architecture would reveal where in the platform's processing pipeline biometric data is captured and in what form it is stored — information directly relevant to whether the platform's operation triggers BIPA's notice and consent requirements and whether those requirements were satisfied. Knowledge of the platform's retention policies would reveal whether biometric templates are destroyed in compliance with BIPA's retention-schedule requirements — or whether they persist indefinitely, as the plaintiffs in the class action allege. Knowledge of the source-code architecture and algorithm design documents would reveal the extent to which Pinnacle's engineers designed TruScan 360 with BIPA compliance in mind — information relevant to both the intentional/reckless versus negligent damages analysis and to the allocation of responsibility between Pinnacle and MTDC under the MSLA.

The firm's possession of this information would create an inherent and unavoidable risk of misuse, even if unintentional, in formulating litigation strategy for MTDC. The attorneys staffed on the MTDC matter might not consciously consult the Pinnacle files, but the institutional knowledge embedded in the firm — and the analytical frameworks, technical understanding, and strategic insights developed through more than two years of intensive engagement with TruScan 360 — would inevitably inform the firm's approach to the MTDC defense. This is precisely the kind of risk that Rule 1.9(c) is designed to prevent.

3. Conclusion on Confidential Information

The confidential information acquired by Calderwood & Harkness in the Pinnacle representation is material to the proposed MTDC engagement. It encompasses the technical architecture, data-handling practices, and retention policies that lie at the core of the BIPA claims and defenses, and it would provide a significant and unfair advantage in the construction of cross-claims and indemnification demands against Pinnacle.

Rule 1.9(c) would independently prohibit the use or disclosure of this information to Pinnacle's disadvantage. This prohibition operates regardless of whether Pinnacle consents to the representation under Rule 1.9(a) and regardless of whether screens or information barriers are erected. The information has not become "generally known" within the meaning of Rule 1.9(c)(1)'s narrow exception, and the firm cannot represent that it could effectively quarantine the knowledge it has acquired over more than two years of immersive technical engagement.

D. Could Informed Consent Cure the Conflict Under Rule 1.9(a)?

1. Legal Standard

Rule 1.9(a) permits the representation of a new client in a substantially related matter with materially adverse interests if the former client "gives informed consent, confirmed in writing." The "informed consent" standard requires that the former client be provided with adequate information about the nature and scope of the proposed representation, the risks it poses to the former client's interests, and the specific ways in which confidential information from the prior representation could be relevant to the new matter.

Unlike Rule 1.7(b), Rule 1.9(a) does not include the threshold requirement that "the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client." This distinction reflects the fact that, in the former-client context, the lawyer's continuing obligations run only to the protection of the former client's interests and confidential information, not to the ongoing quality of representation. The former client's decision to consent is thus given greater deference than in the current-client context, where the lawyer must independently assess whether competent representation remains feasible.

However, the absence of the "reasonable lawyer" threshold does not mean that consent under Rule 1.9(a) is without limits. As the Comments to the rule recognize, there are circumstances in which the scope and sensitivity of the confidential information at issue, combined with the degree of adversity between the clients' interests, make meaningful informed consent extremely difficult — if not impossible — to obtain. See Comment [7] to Illinois Rule 1.9 (noting that "the lawyer should also consider whether the information is of such a nature and extent that the former client could not reasonably be asked to consent").

2. Application. Even assuming that Pinnacle (as a hypothetical former client) were willing to consent to Calderwood & Harkness's representation of MTDC, several features of this conflict render the consent mechanism practically unavailable.

Breadth and sensitivity of confidential information. The confidential information in Calderwood & Harkness's possession is not limited to discrete facts or documents; it encompasses a comprehensive understanding of TruScan 360's technical architecture, source-code structure, data-flow processes, and retention practices. This is precisely the kind of institutional knowledge that cannot be effectively screened or quarantined through information barriers. The attorneys who would staff the MTDC engagement — even if they are entirely different from those who have worked on the Pinnacle matter — would be operating within a firm that possesses deep, systemic knowledge of the very technology platform at the center of the case. Effective screening would be impractical in these circumstances, particularly given the overlapping practice-group resources (Privacy & Data Security and Labor & Employment) that would be required for both engagements.

Pervasive overlap between the matters. The MTDC engagement's core issues — the legality of TruScan 360's biometric-data practices under BIPA — are not peripheral to the Pinnacle engagement; they are central to it. It would be nearly impossible for Calderwood & Harkness to represent MTDC in the BIPA matters without at least the subconscious influence of Pinnacle's confidential information on the firm's litigation strategy, expert-witness selection, discovery priorities, and settlement posture. The risk is not speculative; it is structural.

Directly opposed legal positions. Even if the confidential-information problem could somehow be managed, the fundamental positional conflict would remain. Calderwood & Harkness would be required to argue, in the MTDC engagement, that TruScan 360's biometric-data practices are unlawful — while having previously argued, on behalf of Pinnacle, that those same practices represent a lawful, innovative, and commercially valuable technological achievement. This positional reversal would undermine the credibility of the firm's advocacy in both contexts and could not be remedied through consent.

Practical likelihood of obtaining consent. Finally, it bears noting that the practical likelihood of obtaining informed consent from Pinnacle in these circumstances is exceedingly low. Pinnacle would be asked to consent to Calderwood & Harkness's representation of a client that intends to assert cross-claims and indemnification demands against Pinnacle, seek to establish that Pinnacle's flagship product violates BIPA, and cooperate with an Attorney General investigation that may target Pinnacle as a co-respondent. No rational corporate client — particularly one whose General Counsel is as sophisticated and well-advised as Sandra Yee — would grant such consent.

Conclusion on consent. Even under Rule 1.9(a)'s more permissive consent framework (which does not impose the "reasonable lawyer" threshold of Rule 1.7(b)), the conflict in this case would likely be practically unwaivable. The practical barriers to meaningful informed consent are formidable, and the risk of harm to Pinnacle's interests is too great to be cured through consent alone. Accordingly, even in the hypothetical scenario in which Pinnacle becomes a former client, the proposed MTDC representation would remain barred under Rule 1.9.

VI. Comparison: Rule 1.9 vs. Rule 1.7 in This Scenario

The foregoing analysis confirms that the proposed MTDC representation would be barred under both Rule 1.7 (as the governing rule for the current conflict) and Rule 1.9 (as the rule that would govern if Pinnacle became a former client). A brief comparison of the two frameworks is instructive for the Conflicts Committee's consideration.

Strictness of the governing standard. Rule 1.7 is the stricter standard and is the rule that governs the current conflict. Rule 1.7(b) requires, as a threshold condition to seeking consent, that "the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client." As the companion memorandum on Rule 1.7(b) concludes, this threshold cannot be met in the present circumstances because the directly opposed legal positions regarding TruScan 360, the cross-claim and indemnification posture, and the pervasive confidential-information exposure make it impossible for a reasonable lawyer to believe that Calderwood & Harkness can competently and diligently represent both Pinnacle and MTDC (or MTDC alone, while Pinnacle remains a client). Under Rule 1.7, the conflict is non-waivable.

Rule 1.9(a)'s consent framework. Rule 1.9(a) does not include the "reasonable lawyer" threshold. It requires only the informed consent of the former client, confirmed in writing. This is a somewhat more permissive standard in theory, but as demonstrated in Section V.D above, the practical barriers to meaningful consent in this case are so formidable that the distinction is academic.

Convergent result. Under either rule, the result is the same: the conflict bars Calderwood & Harkness's representation of MTDC in the proposed engagement. This convergence is important because it means that the conflict analysis does not turn on the classification of Pinnacle as a current or former client. Whether Rule 1.7 or Rule 1.9 applies, the firm cannot take on the MTDC matter. The representation is barred under both frameworks.

This convergence also means that any strategic attempt to manipulate the classification — for example, by engineering the termination of the Pinnacle engagement in order to invoke Rule 1.9's less stringent consent mechanism — would be both ethically improper and practically futile. The conflict persists regardless of the rule under which it is analyzed.

VII. Implications for Future Scenarios

The analysis in this memorandum has several implications for the firm's conflicts-management practices going forward.

Persistence of the conflict upon termination of the Pinnacle engagement. If Pinnacle were to terminate its relationship with Calderwood & Harkness at any point in the future — whether through the conclusion of the Veritas litigation, Pinnacle's decision to engage other counsel, or any other circumstance — Rule 1.9 would immediately become operative with respect to any new matter involving TruScan 360 or Pinnacle's biometric-data practices. The conflict identified in this memorandum does not dissipate upon termination of the Pinnacle engagement; it persists as a former-client conflict under Rule 1.9, subject to the analysis set forth in Section V above. The firm should not assume that the passage of time or the conclusion of the Veritas case will eliminate the conflict, particularly given the breadth and sensitivity of the confidential information the firm has acquired.

Conflicts Database update. The cross-reference between Matter No. 1031-00001 (MTDC — to be declined) and Matter No. 1031-00001 (Pinnacle) should be permanently recorded in the firm's Conflicts Database. This cross-reference should be maintained regardless of whether the Pinnacle engagement eventually closes, and it should be flagged for review in connection with any future new-matter intake involving MTDC, Pinnacle, TruScan 360, or BIPA-related biometric-data litigation more broadly.

Future inquiries from MTDC or similar parties. Any future inquiry from MTDC or from other entities concerning TruScan 360-related matters — including BIPA claims, AG investigations, or vendor-indemnification disputes involving Pinnacle — should trigger a review under Rule 1.9 in addition to any other applicable rules. The firm's new-matter intake procedures should be updated to ensure that the Pinnacle/TruScan 360 conflict flag is surfaced promptly in connection with any such inquiry.

Broader implications for biometric-privacy matters. More broadly, the firm should be alert to the possibility that other clients — current or prospective — may be involved in disputes concerning TruScan 360 or other Pinnacle products. Pinnacle's TruScan 360 platform is deployed across a wide range of public- and private-sector organizations, and the BIPA landscape is evolving rapidly. The firm's deep knowledge of TruScan 360's technical architecture may create conflict issues in range future scenarios beyond the specific MTDC engagement addressed in this memorandum. The Conflicts Committee should consider whether additional prophylactic measures — such as a standing conflicts screen covering TruScan 360 and related biometric technologies — are warranted.

VIII. Conclusion

Based on the foregoing analysis, this memorandum reaches the following conclusions:

Primary Conclusion. Illinois Rule of Professional Conduct 1.9 does not apply to the current conflict because Pinnacle Workforce Analytics, Inc. is a current, not former, client of Calderwood & Harkness LLP. The firm has continuously represented Pinnacle since March 14, 2022, and the active patent-enforcement litigation (Pinnacle v. Veritas Biometrics Corp., E.D. Va. Case No. 1:22-cv-01533) remains pending. The governing rule for the current conflict is Illinois Rule 1.7, which is analyzed in the companion memoranda.

Secondary Conclusion (Hypothetical). If Pinnacle were a former client, the proposed MTDC representation would be barred under Rule 1.9(a) because:

(1) The matters are substantially related — both center on TruScan 360's biometric-data architecture and practices, involve the same categories of biometric data (fingerprint, facial-geometry, iris-scan), and address overlapping factual questions regarding how the platform collects, processes, stores, and retains biometric information;

(2) MTDC's interests are materially adverse to Pinnacle's — the MTDC engagement would require characterizing TruScan 360's biometric-data practices as unlawful, MTDC intends to assert cross-claims and indemnification demands against Pinnacle under the MSLA, Pinnacle is a named responsible party in the Attorney General's CID, and the legal positions required in the two representations a

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
To: Rachel Bernstein, Partner, Privacy & Data Security Devon Archer, Associate, Labor & Employment
From: Nadia Petrov, Associate, Labor & Employment
Date: May 13, 2024
Re: Ethics Analysis — Illinois Rule of Professional Conduct 1.9: Duties to Former Clients — Applicability to Proposed Representation of Metropolitan Transit Development Corp. (Matter No. 1031-00001) in Light of Existing Representation of Pinnacle Workforce Analytics, Inc. (Matter No. 1031-00001)
Prepared at the request of: Rachel Bernstein, in connection with the Conflicts Committee review scheduled for May 14, 2024
Superseded by / companion to: See companion memoranda addressing Illinois Rules 1.7 (Direct Adversity), 1.7(b) (Waivability Assessment), and 1.10 (Imputation)
I. Executive Summary
This memorandum addresses the applicability of Illinois Rule of Professional Conduct 1.9, governing the duties owed by lawyers to former clients, to the conflict that has arisen in connection with the proposed representation of Metropolitan Transit Development Corp. ("MTDC") in Matter No. 1031-00001. Specifically, the memorandum considers whether Rule 1.9 governs or constrains Calderwood & Harkness LLP's ability to undertake the MTDC engagement given the firm's existing attorney-client relationship with Pinnacle Workforce Analytics, Inc. ("Pinnacle") in Matter No. 1031-00001.
The primary conclusion of this memorandum is that Illinois Rule 1.9 does not apply to the present conflict analysis because Pinnacle is a current client of Calderwood & Harkness LLP, not a former client. The firm has continuously represented Pinnacle since the opening of Matter No. 1031-00001 on March 14, 2022. The active litigation in Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., No. 1:22-cv-01533 (E.D. Va.), filed September 6, 2022, remains pending and is handled by Jonathan Mercer (responsible partner) and Priya Subramaniam (lead associate). No termination event has occurred, and no withdrawal has been filed. Accordingly, the governing rule for the current conflict is Illinois Rule 1.7 (concurrent conflicts of interest), which imposes stricter requirements than Rule 1.9 and is the subject of separate companion memoranda.
However, for completeness — and to anticipate any future scenario in which the Pinnacle relationship terminates before the proposed MTDC matter is resolved or otherwise reconsidered — this memorandum provides a full hypothetical analysis of Rule 1.9's application. The conclusion of that hypothetical analysis is that even if Pinnacle were treated as a former client, Rule 1.9 would independently bar the proposed MTDC representation for two reinforcing reasons:
First, the matters are "substantially related" within the meaning of Rule 1.9(a). Both the existing Pinnacle engagement and the proposed MTDC engagement center on the same technology platform — Pinnacle's TruScan 360 biometric workforce-management system — and involve the same categories of biometric data (fingerprint, facial-geometry, and iris-scan), the same data-collection architecture, and the same data-handling and retention practices. The overlap is not incidental; it is foundational.
Second, Calderwood & Harkness acquired confidential information from Pinnacle — including technical specifications of TruScan 360's biometric-recognition algorithms, source-code architecture summaries, data-flow diagrams, and biometric-data retention policies — that is directly material to the BIPA enforcement action and employee class action at the core of the proposed MTDC engagement. Rule 1.9(c) would independently prohibit the use or disclosure of this information to Pinnacle's disadvantage.
Taken together, these conclusions reinforce the analysis set forth in the companion Rule 1.7 memoranda: the firm cannot represent MTDC in this matter regardless of whether the Pinnacle relationship is characterized as current or former. The conflict is structural, pervasive, and, as a practical matter, unwaivable.
This memorandum is submitted for inclusion in the materials to be considered by the Conflicts Committee at its meeting on May 14, 2024.
II. Background Facts Relevant to This Analysis
The following background facts are drawn from the firm's conflicts-clearance files, the new-matter intake form for Matter No. 1031-00001, the engagement file for Matter No. 1031-00001, and communications with relevant attorneys within the firm. The facts are presented in the detail necessary for the Conflicts Committee to evaluate the Rule 1.9 analysis and are organized around the two client relationships that give rise to the conflict.
A. The Existing Pinnacle Engagement (Matter No. 1031-00001)
Calderwood & Harkness opened Matter No. 1031-00001 on March 14, 2022. Jonathan Mercer serves as the responsible and billing partner. The engagement was originated by Mr. Mercer following a referral from a former colleague at Pinnacle's prior outside counsel, Davis Thornton LLP. Priya Subramaniam serves as lead associate, with additional staffing from associates and paralegals in the firm's intellectual Property and Technology Transactions practice groups.
The engagement concerns patent-licensing and enforcement matters related to Pinnacle's flagship biometric workforce-management product, TruScan 360. TruScan 360 is an AI-powered timekeeping and scheduling platform that uses fingerprint, facial-geometry, and iris-scan data to authenticate employee identity and manage workforce scheduling and payroll integration. The platform is deployed by a broad range of public- and private-sector clients across the United States, including transit authorities, healthcare systems, manufacturing companies, and government agencies. It is the primary revenue-generating product for Pinnacle, and the company's market position rests substantially on the proprietary biometric-recognition algorithms that underlie TruScan 360's authentication capabilities.
The active litigation within this engagement is Pinnacle Workforce Analytics, Inc. v. Veritas Biometrics Corp., filed on September 6, 2022, in the United States District Court for the Eastern District of Virginia, Case No. 1:22-cv-01533. The case involves patent-infringement claims concerning TruScan 360's core biometric-recognition algorithms. Pinnacle alleges that Veritas Biometrics Corp. developed and marketed a competing biometric-authentication product that infringes on several of Pinnacle's utility patents covering multi-modal biometric fusion, liveness-detection protocols, and encrypted biometric-template storage. The case is in active discovery, with fact discovery not yet closed and dispositive motions anticipated. Calderwood & Harkness's work in this matter has required extensive engagement with TruScan 360's technical architecture, including review of source code, data-flow documentation, and algorithm design materials.
Pinnacle Workforce Analytics, Inc. is a Delaware corporation headquartered at 11900 Sunrise Valley Drive, Suite 500, Reston, Virginia 20191. The company's Chief Executive Officer is Gregory Harmon, and its General Counsel is Sandra Yee. Pinnacle's annual revenues are approximately $485 million, with a significant portion attributable to recurring software-licensing and services revenue from TruScan 360 deployments. The company has approximately 1,600 employees and maintains a portfolio of 47 issued U.S. utility patents and 12 pending patent applications, the majority of which relate to biometric-authentication technology.
Calderwood & Harkness's actual billings from Pinnacle for fiscal year 2023 totaled $2,137,500. This figure reflects a substantial ongoing engagement, though it does not place Pinnacle among the firm's top-ten revenue-producing clients. The engagement is ongoing, with no indication of imminent termination. Sandra Yee has been in regular contact with Jonathan Mercer regarding case strategy and upcoming discovery deadlines, most recently in a telephone conference on May 8, 2024.
B. The Proposed MTDC Engagement (Matter No. 1031-00001)
Metropolitan Transit Development Corp. ("MTDC") is 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.). MTDC is headquartered at 550 West Harrison Street, Suite 1400, Chicago, Illinois 60607. It operates the regional mass-transit system serving the greater Chicago metropolitan area and portions of surrounding counties, with an annual ridership of approximately 215 million trips and a workforce of approximately 12,400 current employees, supplemented by approximately 3,800 former employees who separated from service within the relevant statutory period. MTDC's General Counsel is Terrence Whitfield; its Chief Information Security Officer is Lucia Marchetti; and its Executive Director is Darnell Okafor.
MTDC first approached Calderwood & Harkness on May 6, 2024, through an initial telephone call between Rachel Bernstein and Constance Hargrove of Hargrove, Tillman & Reese LLP. Hargrove, Tillman & Reese serves as MTDC's existing outside litigation counsel for general commercial and government-contracts matters, but the firm lacked the specialized expertise in biometric-privacy law and BIPA compliance required to handle the matters now confronting MTDC. Constance Hargrove identified Calderwood & Harkness's Privacy & Data Security group as having the requisite capabilities and referred MTDC accordingly. A new-matter intake was opened on May 9, 2024, under Matter No. 1031-00001, with Rachel Bernstein designated as the responsible partner and Nadia Petrov and Devon Archer identified as potential staffing from the Labor & Employment group.
The proposed scope of the MTDC engagement encompasses five interrelated workstreams:
(a) Defense of the Illinois Attorney General's Civil Investigative Demand. On April 22, 2024, the Consumer Rights Bureau of the Illinois Attorney General's Office issued a Civil Investigative Demand to MTDC, Reference No. CRB-2024-0417, alleging violations of the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seq., arising from MTDC's deployment of TruScan 360 for employee timekeeping and scheduling purposes. The CID demands production of extensive documentation concerning MTDC's biometric-data collection, consent, retention, and destruction practices, as well as all agreements and communications with technology vendors — including Pinnacle — relating to biometric-data processing.
(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, Illinois, Chancery Division, Case No. 2024-CH-04417, on behalf of a class of approximately 12,400 current and former MTDC employees. The complaint alleges that MTDC violated multiple provisions of BIPA by, among other things, collecting employees' fingerprint, facial-geometry, and iris-scan data through TruScan 360 without providing the written notice and obtaining the written consent required by Section 15(b) of BIPA, and by failing to establish and comply with a publicly available retention schedule and destruction protocol as required by Section 15(a).
(c) Remediation Advice. MTDC seeks counsel regarding the remediation of its biometric-data practices to achieve BIPA compliance going forward, including the implementation of compliant notice-and-consent protocols, the establishment of a retention and destruction schedule, and the potential replacement or reconfiguration of TruScan 360 or migration to an alternative platform.
(d) Cross-Claims and Indemnification Proceedings. MTDC anticipates asserting cross-claims and indemnification demands against its technology vendors — principally Pinnacle — 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 (through June 14, 2026) and contains representations, warranties, and indemnification provisions relating to the legal compliance of TruScan 360's data-handling practices. MTDC's position is that Pinnacle bore contractual responsibility for ensuring that TruScan 360's biometric-data features complied with applicable law, including BIPA, and that Pinnacle should be required to indemnify and hold MTDC harmless for any liability, damages, costs, and expenses arising from the alleged BIPA violations.
(e) Related Employment Counseling. MTDC also seeks ongoing employment-law counseling related to the workforce implications of the biometric-data controversy, including employee communications, potential disciplinary or grievance proceedings under applicable collective-bargaining agreements, and coordination with the transit authority's human-resources department regarding modifications to timekeeping and scheduling protocols.
MTDC's total BIPA exposure has been estimated at between $12,400,000 (if all 12,400 class members recover the minimum statutory damages of $1,000 per violation for negligent violations under Section 20(1)) and $62,000,000 (if all class members recover the maximum statutory damages of $5,000 per violation for intentional or reckless violations under Section 20(2)). These figures do not account for potential penalties or injunctive relief arising from the Attorney General's investigation, which could be substantial.
The estimated fees for the proposed MTDC engagement are $3.5 million to $5.2 million over an anticipated 18- to 24-month engagement period, reflecting the multi-front litigation, the regulatory-investigation defense, the remediation workstream, and the cross-claim and indemnification component. This would represent a significant new engagement for the firm and a material contribution to annual revenues.
C. The Conflict
The conflict between the two representations is direct, structural, and multi-dimensional. Several features of the conflict bear emphasis for purposes of the Rule 1.9 analysis:
Direct adversity regarding TruScan 360. The proposed MTDC engagement would require Calderwood & Harkness to argue that TruScan 360's biometric-data collection, storage, and dissemination practices violated BIPA — a position that is directly adverse to Pinnacle's interests. Pinnacle's business model, patent portfolio, and market position depend on the legitimacy and lawful operation of TruScan 360. Any judicial or regulatory finding that TruScan 360's core data-handling practices violate BIPA would have devastating consequences for Pinnacle, including potential exposure to class-action liability from other TruScan 360 deployments across the country, diminution in the value of Pinnacle's patent portfolio, and reputational harm in its core market.
Pinnacle as a named responsible party and likely cross-claim target. Pinnacle is identified as a responsible party in the Attorney General's CID (Ref. CRB-2024-0417), and the AG's office has indicated that it may name Pinnacle as a co-respondent in any subsequent enforcement action. More significantly, MTDC's anticipated cross-claims and indemnification demands under the MSLA would be asserted directly against Pinnacle, potentially exposing Pinnacle to the full range of MTDC's statutory-damages liability.
Fundamentally inconsistent legal positions. The patent-enforcement matter on behalf of Pinnacle — Pinnacle v. Veritas Biometrics Corp. — depends on establishing the legitimacy, innovation, and commercial value of TruScan 360's biometric capabilities. The claims asserted in that case rest on the premise that TruScan 360's biometric-recognition algorithms represent a significant technological advance that is entitled to patent protection. The proposed MTDC engagement would require the firm to characterize those same capabilities as unlawful surveillance tools that violate employees' biometric-privacy rights under BIPA. These positions are not merely in tension; they are diametrically opposed and fundamentally irreconcilable.
Confidential information exposure. Calderwood & Harkness's work on behalf of Pinnacle in the patent-enforcement matter has required the firm's attorneys to develop detailed, intimate knowledge of TruScan 360's technical architecture, data-handling protocols, source-code structure, and biometric-data retention and destruction practices. This information is directly relevant — indeed, central — to the BIPA claims and defenses at the core of the proposed MTDC engagement. The risk of inadvertent or subconscious use of Pinnacle's confidential information in the MTDC matter is not speculative; it is inherent in the nature of the overlapping subject matter.
III. Text and Requirements of Illinois Rule 1.9
Before proceeding to the substantive analysis, this Section sets forth the text of the relevant provisions of Illinois Rule of Professional Conduct 1.9 and identifies the key elements that govern the analysis.
A. Rule 1.9(a) — Substantially Related Matter
The full text of Illinois Rule 1.9(a) provides:
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 1.9(a) thus establishes four key elements, each of which must be addressed in any analysis of a potential former-client conflict:
(1) Former-client relationship. The rule applies only where the lawyer "has formerly represented a client." This threshold requirement distinguishes Rule 1.9 from Rule 1.7, which governs concurrent conflicts. The existence of a former-client relationship presupposes that an attorney-client relationship was established and has since ended. A client whose engagement is ongoing is not a "former client" within the meaning of Rule 1.9.
(2) Same or substantially related matter. The proposed new representation must involve "the same or a substantially related matter." The "substantially related" standard is the subject of extensive case law and is discussed in detail in Section V.A below. The standard is designed to protect against the risk that confidential information gained in the prior representation could be used to the former client's disadvantage in a new matter.
(3) Materially adverse interests. The interests of the new client must be "materially adverse to the interests of the former client." This element requires more than a theoretical tension between the two clients' positions; there must be a concrete, material conflict between their respective interests in the matters at issue.
(4) Informed consent as a potential cure. The prohibition may be overcome if the former client "gives informed consent, confirmed in writing." Unlike Rule 1.7(b), Rule 1.9(a) does not expressly require that a reasonable lawyer must believe that competent and diligent representation of the new client is possible before seeking consent. However, as discussed in Section V.D below, practical limitations on the effectiveness of consent may render this mechanism unavailable in circumstances involving extensive confidential-information exposure.
B. Rule 1.9(c) — Confidential Information
The full text of Illinois Rule 1.9(c) provides:
A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:
(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or
(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.
Rule 1.9(c) establishes an independent prohibition that operates in tandem with, but separately from, the "substantially related matter" restriction of Rule 1.9(a). Its key features include:
Independent applicability. Rule 1.9(c) prohibits the use or disclosure of former-client confidential information regardless of whether the new representation would otherwise be permissible under Rule 1.9(a). In other words, even if the matters were not "substantially related" and informed consent had been obtained, the firm could not use or reveal Pinnacle's confidential information in the course of representing MTDC.
Breadth of coverage. The rule covers all "information relating to the representation," a phrase that is interpreted broadly to encompass not only information protected by the attorney-client privilege but also any information gained during or relating to the representation, including work-product materials, strategy discussions, business information, and technical data shared in the course of the engagement.
Two distinct prohibitions. Rule 1.9(c)(1) prohibits use of the information to the former client's disadvantage; Rule 1.9(c)(2) prohibits revelation of the information. These are separate prohibitions, and either may be violated independently of the other.
Limited exceptions. The prohibition on use admits an exception for information that "has become generally known," but this exception is narrowly construed. Information does not become "generally known" merely because it is theoretically accessible through public records or could be discovered through independent investigation; it must have been widely disseminated to the relevant public. The technical specifications, source-code architecture, data-flow diagrams, and retention policies at issue here are emphatically not "generally known."
IV. Threshold Determination: Rule 1.9 Does Not Apply — Pinnacle Is a Current Client
A. Status of the Pinnacle Relationship
The threshold question in any Rule 1.9 analysis is whether the client in question is, in fact, a "former" client. That threshold is not met here.
Matter No. 1031-00001 remains open and active in the firm's matter-management system. The engagement has been continuously active since its opening on March 14, 2022. Jonathan Mercer, the responsible partner, confirmed the ongoing status of the engagement in an email to Rachel Bernstein dated May 10, 2024, in which he stated: "The Pinnacle engagement is fully active. We are in the midst of discovery in the Veritas case, with expert depositions scheduled for July and a potential Markman hearing in September. I have been in regular contact with Sandra Yee, most recently on May 8. There is no indication whatsoever that Pinnacle is considering termination of our services."
The patent-enforcement litigation — Pinnacle v. Veritas Biometrics Corp., E.D. Va. Case No. 1:22-cv-01533 — is ongoing. Fact discovery is in progress, dispositive motions are anticipated, and substantial work remains to be performed. No termination of the engagement has been communicated by Pinnacle's General Counsel, Sandra Yee, or its Chief Executive Officer, Gregory Harmon. No engagement letter provision operates to terminate the relationship automatically upon the occurrence of any specified event or the passage of any specified period. No motion to withdraw as counsel of record has been filed or contemplated. The firm continues to bill for services rendered, and Pinnacle continues to pay invoices in the ordinary course.
In short, the Pinnacle engagement is in every relevant respect an active, ongoing attorney-client relationship. There is no basis for treating Pinnacle as a former client.
B. Current-Client Analysis Governed by Rule 1.7, Not Rule 1.9
Because Pinnacle is a current client of Calderwood & Harkness, the applicable rule for analyzing the conflict presented by the proposed MTDC engagement is Illinois Rule of Professional Conduct 1.7, which governs concurrent conflicts of interest. Rule 1.7 imposes stricter obligations on the firm than Rule 1.9 in several material respects.
Under Rule 1.7, the firm must analyze both direct adversity under Rule 1.7(a)(1) — whether the representation of MTDC would be "directly adverse" to Pinnacle — and material limitation under Rule 1.7(a)(2) — whether there is a significant risk that the representation of MTDC would be "materially limited" by the firm's responsibilities to Pinnacle. These analyses are the subject of the companion memorandum on Illinois Rule 1.7 (Direct Adversity).
Additionally, the consent-based waiver mechanism under Rule 1.7(b) is more demanding than the consent mechanism under Rule 1.9(a). Rule 1.7(b) requires, as a threshold condition, that "the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client." This threshold must be satisfied before consent is sought; it is not a question submitted to the clients' judgment but rather a determination that the lawyer must make independently. The companion memorandum on Illinois Rule 1.7(b) (Waivability Assessment) concludes that this threshold cannot be met in the present circumstances.
Rule 1.9 is designed to serve a different function. It operates as a residual protection for clients whose attorney-client relationships with a firm have ended. Its purpose is to ensure that the former client's interests and confidential information continue to receive meaningful protection even after the concurrent-client protections of Rule 1.7 no longer apply. By design, Rule 1.9's requirements are somewhat less stringent than those of Rule 1.7 — reflecting the reality that the duties owed to a former client, while significant, are not as comprehensive as those owed to a current client. Where the client relationship remains active, however, Rule 1.7 governs, and Rule 1.9 has no independent work to do.
C. Conclusion on Threshold Issue
Rule 1.9 is inapplicable to the current conflict. Pinnacle is a current client of Calderwood & Harkness, and the concurrent-conflict provisions of Illinois Rule 1.7 govern the analysis.
The analysis that follows in Section V is presented solely for completeness and to address the hypothetical scenario in which the Pinnacle relationship terminates — whether through the natural conclusion of the Veritas litigation, a decision by Pinnacle to engage other counsel, or any other circumstance — before the proposed MTDC matter is resolved or otherwise reconsidered. The Conflicts Committee should be aware that, as demonstrated below, the conflict does not dissipate if the Pinnacle engagement ends; it persists as a former-client conflict under Rule 1.9.
V. Hypothetical Analysis: If Pinnacle Were a Former Client
For the reasons stated in Section IV, this analysis is presented as a hypothetical exercise. It assumes, solely for purposes of analysis, that the Pinnacle engagement has concluded and that Pinnacle has become a former client of Calderwood & Harkness at some point prior to the commencement of the proposed MTDC representation. Under this assumption, the question becomes whether the proposed MTDC representation would be permissible under Rule 1.9.
The answer is no. As set forth below, the proposed MTDC representation would be barred under both Rule 1.9(a) (because the matters are substantially related and MTDC's interests are materially adverse to Pinnacle's) and Rule 1.9(c) (because the firm possesses Pinnacle confidential information that is material to the MTDC engagement and could not be used without disadvantaging Pinnacle).
A. Would the Matters Be "Substantially Related"?
1. Legal Standard for "Substantial Relationship"
Illinois courts apply a well-established three-part test to determine whether two matters are "substantially related" within the meaning of Rule 1.9(a):
(i) Determine the nature and scope of the prior representation. The court examines what the lawyer did in the prior engagement — the factual and legal issues involved, the types of information exchanged, and the breadth of the attorney's involvement.
(ii) Determine the nature of the present proposed representation. The court then examines the proposed new engagement — its factual and legal issues, the claims and defenses involved, and the information that would be material to the representation.
(iii) Assess whether it is reasonable to infer that confidential information gained in the prior representation would be material to the present matter. This is the critical analytical step. The court does not require proof that specific confidential information was actually disclosed or that the lawyer intends to use it. Instead, the test asks whether, given the nature and scope of the prior representation, it is reasonable to infer that the lawyer acquired confidential information that would be relevant and useful in the new matter.
This framework has been articulated and applied in numerous Illinois decisions. See, e.g., Schwartz v. Cortelloni, 177 Ill. 2d 166, 176 (1997) (describing the "substantial relationship" test and its purpose of protecting against the risk that confidential information from a prior representation will be used against a former client); LaSalle National Bank v. County of Lake, 703 F.2d 252, 255-56 (7th Cir. 1983) (applying the substantial-relationship test and noting that the inquiry focuses on the realistic likelihood that confidences were exchanged, not on whether the attorney can demonstrate that no confidences were shared).
The "substantial relationship" test does not require that the two matters be identical or that the same causes of action be involved. It is sufficient that the factual bases of the two representations are significantly overlapping or intertwined such that confidential information from the first would be relevant and useful in the second. See Comment [3] to Illinois Rule 1.9 ("Matters are 'substantially related' for purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter."). The test is intentionally protective, reflecting the policy judgment that former clients should not be placed in the position of having to demonstrate the precise contours of confidential information they shared with their former lawyer.
2. Application to the Pinnacle/MTDC Matters
Applying the three-part test to the facts of this case yields a clear conclusion: the matters are substantially related.
Step (i): Nature and scope of the prior representation (hypothetical). The Calderwood & Harkness engagement on behalf of Pinnacle (Matter No. 1031-00001) centers on patent-enforcement litigation concerning TruScan 360's core biometric-recognition algorithms. The firm's work in this engagement has involved — and necessarily required — a detailed and intimate understanding of TruScan 360's technical architecture. Specifically, the firm's attorneys have reviewed and analyzed:
•  The technical specifications of TruScan 360's biometric-recognition algorithms, including the multi-modal biometric-fusion methodology, liveness-detection protocols, and encrypted biometric-template storage mechanisms;
•  Source-code architecture summaries provided by Pinnacle's engineering team under the terms of a protective order;
•  Data-flow diagrams documenting how biometric data (fingerprint templates, facial-geometry measurements, and iris-scan patterns) is collected at the point of employee authentication, processed through TruScan 360's algorithmic pipeline, transmitted to centralized and distributed data stores, and ultimately stored and retained;
•  Pinnacle's biometric-data retention policies, including the duration for which biometric templates are retained, the geographic and logical locations where they are stored, and the protocols for eventual destruction;
•  Algorithm design documents reflecting the research-and-development choices that underlie TruScan 360's biometric-authentication capabilities; and
•  Patent-prosecution correspondence relating to the prosecution of Pinnacle's utility-patent portfolio before the United States Patent and Trademark Office.
This is not a case where the prior representation involved tangential or incidental contact with the subject matter at issue. The entire purpose of the Pinnacle engagement was to understand, document, and defend TruScan 360's biometric capabilities at the deepest technical level. The firm's attorneys have spent more than two years immersed in the inner workings of the very platform that is now at the center of MTDC's legal crisis.
Step (ii): Nature of the proposed representation. The proposed MTDC engagement centers on the defense of BIPA enforcement proceedings — both the Attorney General's CID and the employee class action — alleging that TruScan 360's biometric-data collection, storage, and dissemination practices violated Illinois law. The engagement also encompasses remediation advice concerning MTDC's biometric-data practices and, critically, the assertion of cross-claims and indemnification demands against Pinnacle under the MSLA. Each of these workstreams is directly and materially connected to TruScan 360's data-handling architecture and practices.
The BIPA claims against MTDC turn on specific factual questions about how TruScan 360 operates: What biometric data does the platform collect? How is that data processed and stored? Does the platform provide the notice required by BIPA Section 15(b)? Does the platform's data-retention architecture comply with the retention-schedule requirements of BIPA Section 15(a)? How and when are biometric templates destroyed? These are precisely the same factual questions that Calderwood & Harkness has spent more than two years investigating and analyzing in the context of the Pinnacle patent-enforcement litigation.
The cross-claims and indemnification demands against Pinnacle would require the firm to take the further step of asserting that Pinnacle bore responsibility for TruScan 360's alleged BIPA violations — that Pinnacle designed and deployed a platform whose biometric-data practices were not merely deficient but unlawful, and that MTDC is entitled to full indemnification under the MSLA for any resulting liability.
Step (iii): Reasonable inference of material confidential information. Given the nature and scope of the Pinnacle engagement, it is not merely reasonable to infer that Calderwood & Harkness acquired confidential information material to the MTDC matter — it is unavoidable. The firm possesses detailed knowledge of TruScan 360's technical architecture, data-handling protocols, retention practices, and algorithm design, all of which are directly relevant to the BIPA claims and defenses at the core of the MTDC engagement. There is no realistic scenario in which the firm's attorneys could represent MTDC in this matter without drawing on — consciously or unconsciously — the institutional knowledge acquired through the Pinnacle engagement.
Conclusion on substantial relationship. The matters are substantially related within the meaning of Rule 1.9(a). The connection between the two representations is not incidental, attenuated, or tangential. It is direct, pervasive, and foundational. Both matters center on the same technology platform (TruScan 360), the same categories of biometric data (fingerprint, facial-geometry, iris-scan), and the same data-collection, processing, storage, and retention architecture. The patent-enforcement matter requires demonstrating the legitimacy and innovativeness of TruScan 360's design; the MTDC matter would require challenging the legality of those same design features under BIPA. The factual nexus is as close as it can be without the matters being literally identical.
B. Would Interests Be "Materially Adverse"?
1. Legal Standard
The "materially adverse" element of Rule 1.9(a) is satisfied when the proposed representation involves asserting claims, defenses, or legal positions that would be harmful to the former client's legal, financial, or business interests. Material adversity does not require that the new representation involve direct litigation against the former client, though that circumstance plainly satisfies the standard. It is sufficient that the new representation would require the firm to take positions, advance arguments, or pursue outcomes that would be detrimental to the former client. See Comment [1] to Illinois Rule 1.9 (noting that the rule's protections extend to situations in which the former client's interests could be injured by the lawyer's involvement in a substantially related matter, even absent direct adversarial proceedings).
2. Application.  The proposed MTDC engagement would be materially adverse to Pinnacle's interests in multiple, reinforcing respects:
Characterization of TruScan 360 as unlawful. The most fundamental source of adversity is the legal characterization that the MTDC engagement would require Calderwood & Harkness to advance. The firm would be required to argue — in regulatory proceedings, in class-action litigation, and potentially in cross-claim proceedings — that TruScan 360's biometric-data practices violated BIPA (740 ILCS 14/1 et seq.) and potentially the Illinois Personal Information Protection Act (815 ILCS 530/1 et seq.). This characterization would directly undermine Pinnacle's commercial position, the value of its patent portfolio, and its competitive standing in the biometric workforce-management market. A finding that TruScan 360's core data-handling features violate BIPA would have repercussions far beyond the MTDC matter, potentially exposing Pinnacle to liability from other TruScan 360 deployments and jeopardizing its relationships with existing and prospective customers.
Pinnacle as a named party in the Attorney General's investigation. Pinnacle is identified as a responsible party in the Attorney General's CID (Reference No. CRB-2024-0417), and the AG's office has indicated that it may name Pinnacle as a co-respondent in any subsequent enforcement action. Calderwood & Harkness's involvement in the defense of MTDC would place the firm in the position of cooperating with an investigation that could result in enforcement proceedings against its own (hypothetical former) client — a deeply compromised posture.
Cross-claims and indemnification demands against Pinnacle. Perhaps most directly, MTDC's anticipated cross-claims and indemnification demands under the MSLA would be asserted against Pinnacle. The MSLA, dated June 15, 2021, with a total contract value of $8,700,000 over a five-year initial term through June 14, 2026, contains representations and warranties by Pinnacle regarding the legal compliance of TruScan 360's data-handling practices, as well as indemnification provisions that MTDC believes obligate Pinnacle to hold MTDC harmless for BIPA-related liabilities. MTDC's statutory-damages exposure ranges from $12.4 million to $62 million; under the indemnification provisions, MTDC would seek to shift that entire exposure — plus attorneys' fees, costs, and related expenses — to Pinnacle.
Undermining the patent-enforcement litigation. The positions that the firm would be required to take in the MTDC engagement are fundamentally inconsistent with the positions the firm has taken and is taking in the Veritas patent-enforcement litigation. In the Veritas case, Calderwood & Harkness has argued that TruScan 360's biometric-recognition algorithms represent a significant technological innovation — that the platform's multi-modal biometric-fusion methodology, liveness-detection protocols, and encrypted template-storage architecture are novel, non-obvious, and commercially valuable. In the MTDC engagement, the firm would be required to characterize those same features as instruments of unlawful biometric surveillance. These positions cannot coexist in the mouth of the same law firm without fundamentally compromising the credibility and effectiveness of both representations.
Conclusion on material adversity. MTDC's interests are materially adverse to Pinnacle's interests in every meaningful sense. The adversity is direct (cross-claims and indemnification demands), positional (diametrically opposed characterizations of TruScan 360), regulatory (cooperation with an AG investigation that may target Pinnacle), and economic (potential exposure of Pinnacle to tens of millions of dollars in liability). The material-adversity element of Rule 1.9(a) is clearly satisfied.
C. Confidential Information Analysis Under Rule 1.9(c)
1. Categories of Confidential Information Acquired
Even apart from the "substantially related matter" analysis under Rule 1.9(a), Rule 1.9(c) provides an independent basis for concluding that the proposed MTDC representation would be impermissible. The firm's possession of Pinnacle's confidential information — and the impossibility of undertaking the MTDC engagement without at least the risk of using that information to Pinnacle's disadvantage — compels this conclusion.
Per the Confidential Information Inventory prepared by Jonathan Mercer's team (principally Priya Subramaniam, lead associate on the Pinnacle engagement), Calderwood & Harkness possesses the following categories of Pinnacle confidential information relevant to TruScan 360:
(a) Technical specifications of TruScan 360's biometric-recognition algorithms. This includes detailed documentation of the multi-modal biometric-fusion methodology employed by TruScan 360, the platform's liveness-detection protocols, and the algorithmic processes by which biometric data is captured, converted into biometric templates, matched against stored templates, and validated. This information was provided by Pinnacle's engineering team to support the patent-infringement claims in the Veritas litigation and is subject to the protective order entered in that case.
(b) Source-code architecture summaries. The firm has reviewed and analyzed summaries of TruScan 360's source-code architecture, including the structure of the platform's authentication engine, the interface between the biometric-capture modules and the centralized matching server, and the cryptographic protocols used to protect biometric templates in transit and at rest. While the firm does not possess the full source code, the architectural summaries provide a comprehensive understanding of the platform's design and operation.
(c) Data-flow diagrams. Pinnacle provided Calderwood & Harkness with detailed data-flow diagrams documenting the end-to-end lifecycle of biometric data within the TruScan 360 ecosystem — from the point of initial capture at a biometric terminal, through transmission to the authentication server, processing by the matching engine, storage in the biometric-template database, and eventual destruction (or non-destruction, as the case may be) pursuant to Pinnacle's retention policies. These diagrams are central to understanding how TruScan 360 handles the very categories of biometric data (fingerprint, facial-geometry, iris-scan) at issue in the BIPA claims.
(d) Biometric-data retention policies. The firm has detailed knowledge of Pinnacle's biometric-data retention policies, including the duration for which biometric templates are retained following employee separation, the geographic and logical storage locations, and the protocols (if any) for destruction of biometric data at the end of the retention period. This information is directly material to the BIPA claims, which turn in part on whether TruScan 360 and its deploying organizations comply with BIPA Section 15(a)'s requirement for a publicly available retention schedule and destruction protocol.
(e) Algorithm design documents. Calderwood & Harkness has reviewed internal Pinnacle design documents reflecting the research-and-development choices that underlie TruScan 360's biometric-authentication capabilities, including documents reflecting Pinnacle's awareness of (and decisions regarding) the trade-offs between biometric-data accuracy, processing speed, and privacy protections.
(f) Patent-prosecution correspondence. The firm possesses correspondence between Pinnacle and the United States Patent and Trademark Office relating to the prosecution of Pinnacle's utility-patent portfolio, including office actions, responses, and claim amendments. While some of this correspondence is part of the public prosecution history, significant portions contain confidential information regarding Pinnacle's patent strategy, claim-scope decisions, and assessments of prior art.
2. Materiality to the MTDC Matter
Each of the above categories of confidential information is directly material to the claims and defenses at the heart of the proposed MTDC engagement.
The core of the BIPA claims against MTDC concerns whether TruScan 360 collected and stored biometric data in compliance with the statutory requirements of notice, consent, retention schedules, and data-destruction obligations under 740 ILCS 14/15. To build a defense — and, more pointedly, to construct cross-claims and indemnification demands against Pinnacle — MTDC's counsel would need precisely the kind of technical understanding of TruScan 360's data-handling architecture that Calderwood & Harkness has already acquired through the Pinnacle engagement.
Knowledge of TruScan 360's data-flow architecture would reveal where in the platform's processing pipeline biometric data is captured and in what form it is stored — information directly relevant to whether the platform's operation triggers BIPA's notice and consent requirements and whether those requirements were satisfied. Knowledge of the platform's retention policies would reveal whether biometric templates are destroyed in compliance with BIPA's retention-schedule requirements — or whether they persist indefinitely, as the plaintiffs in the class action allege. Knowledge of the source-code architecture and algorithm design documents would reveal the extent to which Pinnacle's engineers designed TruScan 360 with BIPA compliance in mind — information relevant to both the intentional/reckless versus negligent damages analysis and to the allocation of responsibility between Pinnacle and MTDC under the MSLA.
The firm's possession of this information would create an inherent and unavoidable risk of misuse, even if unintentional, in formulating litigation strategy for MTDC. The attorneys staffed on the MTDC matter might not consciously consult the Pinnacle files, but the institutional knowledge embedded in the firm — and the analytical frameworks, technical understanding, and strategic insights developed through more than two years of intensive engagement with TruScan 360 — would inevitably inform the firm's approach to the MTDC defense. This is precisely the kind of risk that Rule 1.9(c) is designed to prevent.
3. Conclusion on Confidential Information
The confidential information acquired by Calderwood & Harkness in the Pinnacle representation is material to the proposed MTDC engagement. It encompasses the technical architecture, data-handling practices, and retention policies that lie at the core of the BIPA claims and defenses, and it would provide a significant and unfair advantage in the construction of cross-claims and indemnification demands against Pinnacle.
Rule 1.9(c) would independently prohibit the use or disclosure of this information to Pinnacle's disadvantage. This prohibition operates regardless of whether Pinnacle consents to the representation under Rule 1.9(a) and regardless of whether screens or information barriers are erected. The information has not become "generally known" within the meaning of Rule 1.9(c)(1)'s narrow exception, and the firm cannot represent that it could effectively quarantine the knowledge it has acquired over more than two years of immersive technical engagement.
D. Could Informed Consent Cure the Conflict Under Rule 1.9(a)?
1. Legal Standard
Rule 1.9(a) permits the representation of a new client in a substantially related matter with materially adverse interests if the former client "gives informed consent, confirmed in writing." The "informed consent" standard requires that the former client be provided with adequate information about the nature and scope of the proposed representation, the risks it poses to the former client's interests, and the specific ways in which confidential information from the prior representation could be relevant to the new matter.
Unlike Rule 1.7(b), Rule 1.9(a) does not include the threshold requirement that "the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client." This distinction reflects the fact that, in the former-client context, the lawyer's continuing obligations run only to the protection of the former client's interests and confidential information, not to the ongoing quality of representation. The former client's decision to consent is thus given greater deference than in the current-client context, where the lawyer must independently assess whether competent representation remains feasible.
However, the absence of the "reasonable lawyer" threshold does not mean that consent under Rule 1.9(a) is without limits. As the Comments to the rule recognize, there are circumstances in which the scope and sensitivity of the confidential information at issue, combined with the degree of adversity between the clients' interests, make meaningful informed consent extremely difficult — if not impossible — to obtain. See Comment [7] to Illinois Rule 1.9 (noting that "the lawyer should also consider whether the information is of such a nature and extent that the former client could not reasonably be asked to consent").
2. Application.  Even assuming that Pinnacle (as a hypothetical former client) were willing to consent to Calderwood & Harkness's representation of MTDC, several features of this conflict render the consent mechanism practically unavailable.
Breadth and sensitivity of confidential information. The confidential information in Calderwood & Harkness's possession is not limited to discrete facts or documents; it encompasses a comprehensive understanding of TruScan 360's technical architecture, source-code structure, data-flow processes, and retention practices. This is precisely the kind of institutional knowledge that cannot be effectively screened or quarantined through information barriers. The attorneys who would staff the MTDC engagement — even if they are entirely different from those who have worked on the Pinnacle matter — would be operating within a firm that possesses deep, systemic knowledge of the very technology platform at the center of the case. Effective screening would be impractical in these circumstances, particularly given the overlapping practice-group resources (Privacy & Data Security and Labor & Employment) that would be required for both engagements.
Pervasive overlap between the matters. The MTDC engagement's core issues — the legality of TruScan 360's biometric-data practices under BIPA — are not peripheral to the Pinnacle engagement; they are central to it. It would be nearly impossible for Calderwood & Harkness to represent MTDC in the BIPA matters without at least the subconscious influence of Pinnacle's confidential information on the firm's litigation strategy, expert-witness selection, discovery priorities, and settlement posture. The risk is not speculative; it is structural.
Directly opposed legal positions. Even if the confidential-information problem could somehow be managed, the fundamental positional conflict would remain. Calderwood & Harkness would be required to argue, in the MTDC engagement, that TruScan 360's biometric-data practices are unlawful — while having previously argued, on behalf of Pinnacle, that those same practices represent a lawful, innovative, and commercially valuable technological achievement. This positional reversal would undermine the credibility of the firm's advocacy in both contexts and could not be remedied through consent.
Practical likelihood of obtaining consent. Finally, it bears noting that the practical likelihood of obtaining informed consent from Pinnacle in these circumstances is exceedingly low. Pinnacle would be asked to consent to Calderwood & Harkness's representation of a client that intends to assert cross-claims and indemnification demands against Pinnacle, seek to establish that Pinnacle's flagship product violates BIPA, and cooperate with an Attorney General investigation that may target Pinnacle as a co-respondent. No rational corporate client — particularly one whose General Counsel is as sophisticated and well-advised as Sandra Yee — would grant such consent.
Conclusion on consent. Even under Rule 1.9(a)'s more permissive consent framework (which does not impose the "reasonable lawyer" threshold of Rule 1.7(b)), the conflict in this case would likely be practically unwaivable. The practical barriers to meaningful informed consent are formidable, and the risk of harm to Pinnacle's interests is too great to be cured through consent alone. Accordingly, even in the hypothetical scenario in which Pinnacle becomes a former client, the proposed MTDC representation would remain barred under Rule 1.9.
VI. Comparison: Rule 1.9 vs. Rule 1.7 in This Scenario
The foregoing analysis confirms that the proposed MTDC representation would be barred under both Rule 1.7 (as the governing rule for the current conflict) and Rule 1.9 (as the rule that would govern if Pinnacle became a former client). A brief comparison of the two frameworks is instructive for the Conflicts Committee's consideration.
Strictness of the governing standard. Rule 1.7 is the stricter standard and is the rule that governs the current conflict. Rule 1.7(b) requires, as a threshold condition to seeking consent, that "the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client." As the companion memorandum on Rule 1.7(b) concludes, this threshold cannot be met in the present circumstances because the directly opposed legal positions regarding TruScan 360, the cross-claim and indemnification posture, and the pervasive confidential-information exposure make it impossible for a reasonable lawyer to believe that Calderwood & Harkness can competently and diligently represent both Pinnacle and MTDC (or MTDC alone, while Pinnacle remains a client). Under Rule 1.7, the conflict is non-waivable.
Rule 1.9(a)'s consent framework. Rule 1.9(a) does not include the "reasonable lawyer" threshold. It requires only the informed consent of the former client, confirmed in writing. This is a somewhat more permissive standard in theory, but as demonstrated in Section V.D above, the practical barriers to meaningful consent in this case are so formidable that the distinction is academic.
Convergent result. Under either rule, the result is the same: the conflict bars Calderwood & Harkness's representation of MTDC in the proposed engagement. This convergence is important because it means that the conflict analysis does not turn on the classification of Pinnacle as a current or former client. Whether Rule 1.7 or Rule 1.9 applies, the firm cannot take on the MTDC matter. The representation is barred under both frameworks.
This convergence also means that any strategic attempt to manipulate the classification — for example, by engineering the termination of the Pinnacle engagement in order to invoke Rule 1.9's less stringent consent mechanism — would be both ethically improper and practically futile. The conflict persists regardless of the rule under which it is analyzed.
VII. Implications for Future Scenarios
The analysis in this memorandum has several implications for the firm's conflicts-management practices going forward.
Persistence of the conflict upon termination of the Pinnacle engagement. If Pinnacle were to terminate its relationship with Calderwood & Harkness at any point in the future — whether through the conclusion of the Veritas litigation, Pinnacle's decision to engage other counsel, or any other circumstance — Rule 1.9 would immediately become operative with respect to any new matter involving TruScan 360 or Pinnacle's biometric-data practices. The conflict identified in this memorandum does not dissipate upon termination of the Pinnacle engagement; it persists as a former-client conflict under Rule 1.9, subject to the analysis set forth in Section V above. The firm should not assume that the passage of time or the conclusion of the Veritas case will eliminate the conflict, particularly given the breadth and sensitivity of the confidential information the firm has acquired.
Conflicts Database update. The cross-reference between Matter No. 1031-00001 (MTDC — to be declined) and Matter No. 1031-00001 (Pinnacle) should be permanently recorded in the firm's Conflicts Database. This cross-reference should be maintained regardless of whether the Pinnacle engagement eventually closes, and it should be flagged for review in connection with any future new-matter intake involving MTDC, Pinnacle, TruScan 360, or BIPA-related biometric-data litigation more broadly.
Future inquiries from MTDC or similar parties. Any future inquiry from MTDC or from other entities concerning TruScan 360-related matters — including BIPA claims, AG investigations, or vendor-indemnification disputes involving Pinnacle — should trigger a review under Rule 1.9 in addition to any other applicable rules. The firm's new-matter intake procedures should be updated to ensure that the Pinnacle/TruScan 360 conflict flag is surfaced promptly in connection with any such inquiry.
Broader implications for biometric-privacy matters. More broadly, the firm should be alert to the possibility that other clients — current or prospective — may be involved in disputes concerning TruScan 360 or other Pinnacle products. Pinnacle's TruScan 360 platform is deployed across a wide range of public- and private-sector organizations, and the BIPA landscape is evolving rapidly. The firm's deep knowledge of TruScan 360's technical architecture may create conflict issues in range future scenarios beyond the specific MTDC engagement addressed in this memorandum. The Conflicts Committee should consider whether additional prophylactic measures — such as a standing conflicts screen covering TruScan 360 and related biometric technologies — are warranted.
VIII. Conclusion
Based on the foregoing analysis, this memorandum reaches the following conclusions:
Primary Conclusion. Illinois Rule of Professional Conduct 1.9 does not apply to the current conflict because Pinnacle Workforce Analytics, Inc. is a current, not former, client of Calderwood & Harkness LLP. The firm has continuously represented Pinnacle since March 14, 2022, and the active patent-enforcement litigation (Pinnacle v. Veritas Biometrics Corp., E.D. Va. Case No. 1:22-cv-01533) remains pending. The governing rule for the current conflict is Illinois Rule 1.7, which is analyzed in the companion memoranda.
Secondary Conclusion (Hypothetical). If Pinnacle were a former client, the proposed MTDC representation would be barred under Rule 1.9(a) because:
(1) The matters are substantially related — both center on TruScan 360's biometric-data architecture and practices, involve the same categories of biometric data (fingerprint, facial-geometry, iris-scan), and address overlapping factual questions regarding how the platform collects, processes, stores, and retains biometric information;
(2) MTDC's interests are materially adverse to Pinnacle's — the MTDC engagement would require characterizing TruScan 360's biometric-data practices as unlawful, MTDC intends to assert cross-claims and indemnification demands against Pinnacle under the MSLA, Pinnacle is a named responsible party in the Attorney General's CID, and the legal positions required in the two representations a

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