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THE MECHANICS OF A CONFLICTS CHECK

7/5/2016

2 Comments

 

 
 
            I regularly stress to lawyers the importance of avoiding conflicts.  There is no such thing as a small conflict.  It is either/or.  As they say, if you think it is a small issue, you have never been in a dark room with a mosquito.
            Having stressed the likely results with a conflict in a claim against a lawyer, I recently gave a conflicts presentation which highlighted the need to first develop a solid conflict checking procedure.  We often forget that the later conflicts check comes directly from the initial file opening, done perhaps years before.  In that presentation, I decided I could do them more good with conflicts by helping them develop a good procedure to open files.
            As the law practice has changed, clearing conflicts now has to be both nimble and effective at the same time.  The time of getting back to the client next week is over.  The reasonable man standard, as applied to lawyers, requires you to use computer-assisted technology to do conflicts, in my opinion.  A study by HBR Consulting in 2016 showed that lawyers reported 58% lost business due to delays in clearing conflicts while 75% reported new business because they cleared conflicts promptly.  So, your system needs to be reliable and needs to work quickly.
            First of all, the contacted lawyer needs to stop the prospective client from revealing facts or confidences until after the conflicts are cleared.  If you are conflicted out on the new case because you are already representing the opposing party, you could be then conflicted out of both if you heard the facts and defenses of the proposed new client, before you cleared the case.  Most often, the lawyer must actively stop the proposed client from revealing these facts at the initial call.
            Most professional rules require conflict checks at these times (e.g. NY Bar Assoc. Comm. On Professional Ethics Opinion 1085):
                        • When the firm agrees to represent a new client;
                        • When the firm agrees to represent an existing client in a new matter;
                        • When the firm brings in lawyers who have practiced before;
                        • When an additional party is named or appears in a pending matter.
 
So, all this stresses that you are not done with just the original check.  It is a moving target and that requires the lawyer to initiate later checks during the handling of the matter.  For this reason, your process needs to be solid, highly accurate, and functional.
            The file opening procedure therefore is the ground work for the later computer-assisted checks.  The opening system should force the lawyer to determine exactly who the client is and to so state that along with the scope of the engagement (both should be upfront in the engagement letter).  In claims you sometimes see lawyers who were not clear that they were representing the corporation and not the CEO or the Board, as an example.  Occasionally, they also lose sight of their client during the representation.  The basic issue for the conflicts check thereafter always starts with checking against clients.
            Secondly, to whom will this new client be adverse?  That is also a fundamental element in later checks.  Adverse before, and adverse now, would not be a problem in the conflicts check. Another block in the opening process should include a listing of “other parties” in the litigation or the transaction.  This becomes relevant if a new party enters, or some other claim is made.  So long as you are neither adverse to them, nor have relevant confidential information from them on the issue, you could have current clients in a case you are handling for a new client as “other parties”.
            While not necessarily a conflict (see ABA Opinion 95-390 (1995)) being adverse to a client’s affiliate or subsidiary can cause you some issues unless resolved with the current client.  Accordingly, it is helpful to list all known affiliates when opening a new matter.  Watch out for client guidelines that seek to impose “one equals all” rules upon you when these do not necessarily exist under the professional rules.  Likewise, a listing of the principal contact for the file may present an embarrassing moment years later when another partner sues the CEO of your current client.  Not a true conflict if you only represented the company, but it sure presents a political and practical conflict.
            These basics should all go into your normal file openings, followed by an engagement letter.  Later when a search is made, your system should give you back a full report that allows “wild card” or “expander” type searches of various spellings of the name.  Your conflicts report then would show prior clients with that name, the matter, and when opened and when closed, if so.  I suggest a line for the attorney to sign and date showing he or she checked all the disclosed information against the new parties.  It sure makes a good exhibit in any claim against the lawyer alleging a conflict of interest.

 
 
 

2 Comments
Jansen link
11/8/2022 09:36:37 am

I appreciate the informative article and expertise. keep up the great work!

Reply
Lawyer Red Deer link
11/16/2022 03:10:50 pm

Our career is often about conflicts. I appreciate the through read.

Reply



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    Steve Crislip was the General Counsel and Loss Prevention Member to a 11 office and 7 jurisdiction law firm for 10 years and has been defending lawyers and firms for more than 25 years and litigating for 40 years.
    These articles reflect lessons learned for Law Firms.

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