On October 17, 2016, in US v. Prevezon, the US Court of Appeals for the Second Circuit granted a writ of mandamus to reverse an order denying disqualification and, in deciding an issue of first impression for the court, ordered disqualification of an attorney due to the potential harm to a non-party non-witness ( (2d Cir. Oct. 17, 2016)).

This case involved a civil forfeiture action brought by the United States against a group of defendant corporations collectively known as Prevezon. The US alleged that the Prevezon defendants benefited from a complex scheme involving sham companies, forged documents, and tax rebates that defrauded the Russian treasury out of about $230 million

As part of the fraud, a group of corrupt Russian officials and others raided the offices of Hermitage Capital Management Ltd. (HCML), an investment advisory firm that focused on investments in Russia. The raiders stole corporate documents that were later used to fraudulently transfer ownership of HCML assets and ultimately obtain tax refunds from the Russian treasury. The United States alleged that a portion of these funds were transferred into Prevezon's accounts and used to purchase Manhattan real estate.

HCML, a victim of the fraud, hired attorneys in Russia to investigate the raid and theft, but Russian authorities responded by opening a criminal investigation against the firm. In September 2008, HCML hired John Moscow, an attorney at BakerHostetler, to gather evidence and defend against the Russian criminal charges. BakerHostetler represented HCML for about nine months and received almost $200,000 in fees from HCML. HCML then retained new counsel, which continued the investigation into the stolen funds.

In September 2013, after its own investigation, the US filed a civil forfeiture suit against Prevezon, who hired Moscow and BakerHostetler to defend it. Initially, Prevezon denied that its defense strategy would implicate HCML in the Russian treasury fraud, claiming that both HCML and Prevezon were innocent. Belatedly, in 2015, Prevezon revealed that, at trial, it would argue that HCML in fact committed the fraud.

Although neither a party nor a witness to the civil forfeiture suit, HCML moved to disqualify BakerHostetler. The district court initially granted the motion but after briefing, reversed its decision and denied the motion. The court found no substantial relationship between the subject matter of the two representations and concluded that Moscow's representation of Prevezon posed no risk of trial taint. HCML sought a petition for a writ of mandamus from the Second Circuit.

The Second Circuit granted the petition of mandamus and instructed the district court to enter an order disqualifying Moscow and BakerHostetler from representing Prevezon in the civil forfeiture suit. The appeals court found that the case presented the extraordinary circumstances necessary to grant a writ of mandamus because:

The court found that BakerHostetler’s representations of Prevezon and HCML were substantially related and, as a result, there is an irrebuttable presumption that confidences were shared. There is no need for the district court to inquire into the nature and extent of any confidential information shared.

Resolving a question of first impression, the court held that BakerHostetler should be disqualified from representing Prevezon because there was a conflict of interest posing potential harm to HCML, a non-party non-witness to the action: the risk of prosecution by a foreign government based on the potential disclosure of confidential information obtained during a prior representation.

Though HCML was a nonparty, non-witness to the forfeiture action, granting the mandamus petition was appropriate because:

The court also noted that HCML was not a "mere spectator" to the forfeiture litigation. Rather, as the putative victim, HCML had legitimate interests in criminal proceedings that supported their motion for disqualification.