Why It’s Important to Have Attorney Accountability Built Into Your Firm’s Conflict Checking Process

What happens in your firm if there’s a hit during a conflicts check? Hopefully, the conflict concern is immediately brought to the attention of the intake attorney. In firms that routinely and systematically check for conflicts, this does occur. Is that action in and of itself sufficient? I would suggest it isn’t, at least some of the time.

Here’s one reason why. An identified conflict will occasionally put the intake attorney in a precarious situation, particularly if there’s no bright-line guidance in an ethics rule that would clarify if it’s permissible to move forward or not. Things get even more concerning if there’s a possibility of earning a significant legal fee if a decision to move forward is made. My concern is this. Sometimes money drives ethics and that can lead to serious trouble when it happens.

When trying to work through a serious conflict coupled with a potentially significant legal fee, an intake attorney may not always make the most responsible decision. Personal desires, rationalizations, and financial pressures can occasionally cloud one’s thinking. Given this reality, leaving any and all conflict resolution decisions entirely up to every intake attorney’s individual discretion can result in considerable malpractice exposure for any law firm.

For example, over the years, I’ve consulted with several firms that were surprised to learn a significant conflict concern arose during intake and the subject attorney (in one instance the most senior named partner who believed the firm’s rules didn’t apply to him) unilaterally decided to move forward when, from an ethical perspective, he shouldn’t have. The common factor in every one of those situations was their conflict checking process lacked attorney accountability.

Here's one way to address this problem. If the conflict hit is such that it’s not immediately apparent your firm is conflicted out, the conflict concern should be brought to the attention of the intake attorney and a partner or departmental chair responsible for conflict resolution. Fortunately, the vast majority of these conflict hits will result in a quick sign-off as the intake attorney can readily explain why the name match isn’t going to be a problem.

For those situations that aren’t crystal clear, it’s essential that you have an unbiased trusted member of your firm involved as a conflict resolution attorney. (Note: Larger firms may even establish a conflict resolution committee.) The responsibility of the person or persons serving in this role will be to provide counsel to the intake attorney and make the ultimate conflict decision on behalf of your firm should that ever become necessary. Given this, the conflict resolution attorney should not only be a respected member of your firm, he or she must also have the ability to rise above concerns over immediate cash flow and examine the proffered representation in light of what the ultimate benefit to or concerns for your firm may be.

If you happen to be a solo or are unable to resolve the conflict internally, consider seeking outside advice. Use one of your life lines! Place a call to a law school ethics professor, bar counsel, a malpractice defense practitioner, a bar related or insurance carrier’s risk manager, or even another trusted colleague. In addition, a review of the applicable rules of professional conduct and commentary will often prove worthwhile.

Maybe you'd argue the risk doesn't justify the effort. My response is always the same. Have you considered the exposure issues that can come into play in a conflict of interest malpractice claim? The outcome of some of these claims is the subject firm must disgorge its fee because you can’t profit from a matter you should never have been involved in in the first place. Oh, and remember that malpractice insurance policies don’t cover disgorgement of fees. If those fees happen to be substantial, you’re going to feel some pain.

More troublesome is the issue of notice to your malpractice insurance carrier. Conflict of interest claims don’t arise overnight, they evolve over time. Attorneys are often aware of a potential problem when clients are troubled by how their matter is progressing. If one or more insurance reapplication periods pass during the time of client discontent or if coverage is placed with a different carrier in the interim, the insurance carrier may deny coverage once the claim eventually arises; but why?

From the carrier’s perspective, the firm was aware of an act, error or omission that could reasonably have been expected to be the basis of a claim or suit and this information was not reported in a timely fashion under the terms of the policy. Read your malpractice insurance policy carefully and pay particular attention to the notice requirements. Conflict claims do get denied for this very reason. When a firm was well aware of a conflict problem and made the decision to put their financial interests above the interests of their clients and charge ahead regardless, insurance carriers (and juries) have little tolerance for this, especially after learning about it a year or two later.

Yes, I strongly believe the practice of law is a profession. But the running of a law practice is a business, and as such you do need to have built-in accountability procedures that responsibly address high-risk exposures if you wish to remain in business long-term. Trust me, I’ve worked with firms that dismissed the seriousness of this concern. All I can say is a few of them paid dearly for that misstep. Don’t risk having your firm be the next to do so.