For many practices, there has been a recent uptick in the mobility of both lawyers and clients from firm to firm. This significant departure from traditional practices has required law firms to establish and maintain a reliable conflict checking system to avoid unnecessary conflict-based malpractice claims.
Many attorneys view the conflict checking process as a chore, but a necessary evil when taking on a new case or bringing in a new employee. However, performing a conflict check does not have to be a dull or daunting. The best practice is to have a methodical procedure in place that prevents a file from being opened until a conflicts check has first been performed. Several types of conflict software exists for all law firm sizes, and virtually every firm has some kind of document management or file management system with search capabilities that can also be utilized.
If a conflict exists, it must be identified and where possible resolved through the use of appropriate conflict waiver agreements before proceeding with the client. If a known conflict of interest is not immediately addressed, the law firm basically is a “sitting duck” for a legal malpractice claim if a problem subsequently develops. This is because at any point where a client loses a case, or suffers a financial loss in connection with a matter involving a transaction in which the “conflicted” law firm is providing legal services, the client will blame the law firm once the conflict is revealed. Judges and juries do not look favorably on professional liability claims concerning a conflict of interest and the claims are difficult to defend. The mere appearance of impropriety from an undisclosed conflict of interest is highly inflammatory to jurors. The onus is on the law firm to protect itself.
Even when conflict waivers are executed, conflict situations still pose risk, and circumstances arise where the conflict is, or becomes, unwaivable. In such situations, the client loses out financially, having invested fees in one law firm, only to have to retain new counsel, and/or the law firm may be exposed to disqualification on the matter. Worse, if the client is disappointed in the result of the underlying matter, the conflict could form the basis of a legal malpractice suit, alleging that the client would not have proceeded with the underlying case or transaction “but for” the undisclosed or unwaivable conflict.
So what are some necessary elements for establishing and maintaining an effective conflicts check system? Here is a helpful checklist that all law firms can employ to avoid potential conflict problems:
- Before opening any new file, perform a conflicts check. If this procedure is used, it will prevent a file number from being assigned, and will prevent a lawyer from doing any work and billing the client until the conflict search is complete and documented.
- The law firm should prepare formal written conflict checking and resolution procedures, which set forth the law firm’s position with respect to conflicts of interest.
- Ensure that your chosen conflict checking system can search name variations and spellings and show any party’s relationship with any client and the nature of that relationship. To properly identify conflicts, the current and former names of every person or entity represented by the law firm must be entered, as well as that of employees and lateral hires. As noted, conflicts software is readily available, and law firms of all sizes can utilize such software to search all active and closed files – the results may even yield helpful information to the case itself.
- A conflict check is only as good as the information submitted to the conflicts computer system. The most technologically advanced conflicts software in the world is useless if the information submitted is not accurate. Therefore, quality control -- such as training and supervision of support staff -- is essential.
- In the event that a conflict exists, it must be identified and addressed by a formal or ad hoc conflicts committee in the firm. The originating attorney should not be involved in the evaluation and determination of the potential conflict as their objectivity may be questioned.
- If a conflict is identified, the use of an appropriate conflict waiver agreement may resolve the conflict. However, enter into such waivers with caution as noted above.
- Conflict checks should be performed: (i) before opening a new case; (ii) before a new matter for an existing client is opened; (iii) whenever a new party, attorney, witness or expert enters the representation; and (iv) whenever the firm decides to interview perspective new employees.
As conflict-based malpractice claims are among the most rapidly increasing problem areas in the legal profession, the proper identification and resolution of conflicts of interest has become a major concern facing law firms today. However, an established conflict-checking system can help effectively detect and minimize conflict-based problems before they arise.*
* This article was prepared by Andrew R. Jones, Esq. and Ashley R. Graham, Esq. of the New York City-based law firm of Furman Kornfeld & Brennan LLP. Andrew and Ashley work as part of a team of 15 lawyers devoted to the defense of attorneys and other professionals in malpractice and disciplinary matters. For more information about the above topic or the authors, please visit: www.fkblaw.com.
We trust that the above article was useful and thought provoking; however, please note that it is intended a general guide only, not a complete analysis of the issues addressed, and readers should always seek specific legal guidance on particular matters.
For more information on LPL coverage generally and how conflict checking and client selection can affect the exposure of your firm to malpractice claims, contact Mike Mooney at 800.265.2876 x 11441 or click here to email Mike Mooney