Article: Conflicts of Interest and Attorney Accountability

By Mark Bassingthwaighte, Esq.

Risk Manager, ALPS Corporation

What happens in your firm after there’s been 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. The interesting question however is this, is that action in and of itself sufficient? I would suggest that it is not, at least some of the time, and here’s one reason why. An identified conflict will occasionally put the intake attorney in a precarious situation. Sometimes there will simply be no bright line rule upon which to draw when trying to decide whether it is permissible to move forward or not. Add to this the possibility of a significant legal fee if the decision is made to move forward and my concern becomes clear. Sometimes money drives ethics and, if and when it does, that can come back to haunt you.

When faced with a potentially serious conflict that is coupled with a potentially significant legal fee, well let’s just acknowledge that reasonable minds may not always make the most responsible decision. Personal desires, rationalizations, and financial pressures can sometimes 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 real exposure for the law firm. I actually have worked with several firms that were surprised to learn that a significant conflict concern arose during intake and the subject attorney (in one instance the most senior named partner) unilaterally made a decision to move forward when, from an ethical perspective, he should not have. Unfortunately for the firms involved, the fallout was rather severe. The common factor in every one of those situations was this. There was no attorney accountability built into the process. Clearly there ought to be, and fortunately there is, a better way.

If the conflict hit is such that it is not immediately apparent that the firm is conflicted out, the conflict concern should be brought to the attention not only of the intake attorney but the partner or departmental chair responsible for conflict resolution as well. The vast majority of conflict hits will result in a relatively quick sign-off as the intake attorney can readily explain why the name match is not going to be a problem. For those situations that are not clear, it is essential to have a non-involved attorney who is a trusted member of the firm act as the conflicts resolution attorney. (Note: Larger firms may even establish a conflict resolution committee.) Not only will the conflicts resolution attorney be able to counsel the intake attorney, she will also be able to make the ultimate conflict decision on behalf of the firm if that becomes necessary. Given this, the conflict resolution attorney should be a senior member of the firm who can rise above concerns over immediate cash flow and examine the proffered representation in light of what the ultimate benefit to or concerns for the firm may be.

In some instances, seeking the advice of ethics counsel may even be warranted. Some firms have an in-house ethics counsel which makes this rather easy. If your firm doesn’t, you may need to seek outside advice. Consider placing 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 provide further clarification.

Even after hearing all of the above, I still occasionally have attorneys try to argue that the overall risk doesn’t justify such an effort. To them I respond as follows. Have you considered the exposure issues that may come into play in a conflict of interest malpractice claim? The end result of some conflict claims is that the firm must disgorge its fee because you cannot profit from a matter that you should never have been involved in in the first place. Oh, and remember this, malpractice insurance policies do not cover disgorgement of fees and, as we’ve been discussing, sometimes the fees in question are substantial. This can be a harsh outcome.

Even more troublesome is the issue of notice to a malpractice insurance carrier. Conflict of interest claims do not arise overnight. 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. 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.

I strongly believe that the practice of law is a profession. But the running of a law practice is a business, and such businesses do need to have built-in accountability procedures that responsibly address high risk exposures if they wish to remain in business long-term. When viewed in this light, doesn’t the above approach just make good sense? I certainly think so.

ALPS Risk Manager Mark Bassingthwaighte, Esq. has conducted over 1,000 law firm risk management assessment visits, presented numerous continuing legal education seminars throughout the United States, and written extensively on risk management and technology. Check out Mark’s recent seminars to assist you with your solo practice by visiting our on-demand CLE library at Mark can be contacted at: