Let me begin with this much being clear: malpractice carriers are concerned about your potential conflicts of interest. Admittedly, published claims statistics don’t necessarily bear this out. In the ABA Standing Committee on Lawyers’ Professional Liability report "Profile of Legal Malpractice Claims 1996-1999," only 5.12% of the claims were reported as arising from "conflict of interest." Yet if you were to spend a little time chatting with a claims attorney, you would discover that conflict of interest issues also have a role in the development of claims that get reported as a different type of error. The conflict was not the principal error, in other words. The conflict was more of a "fuel" that helped to feed the malpractice fire.
Malpractice carriers also are concerned about conflict of interest claims because they can lead to substantial losses simply due to jury appeal. Frame a conflict of interest case as the attorney’s choice between accepting a nice fee and ignoring a conflict of interest, and see what a jury does with this. Please don’t be surprised when you see some very large awards.
The first step in addressing a conflict of interest simply is to recognize that one may exist. Too often an attorney will not give enough attention to the question, "Do I have a conflict of interest in handing this matter?" Certainly you may run a name through your conflicts system, but this is not necessarily adequate. Yes, it might well identify situations with clear conflicts of interest, but you really should be concerned with relationships that are more muddied. These murky relationships are easily overlooked, ignored or dismissed outright – and that is where trouble can begin.
The following are examples of situations that have potential but unclear conflicts of interest:
- altering a will for one party after having done wills for both parties several years earlier;
- representing a partnership in some matters and one of its partners in others;
- entering business relationships with ongoing clients;
- suing a previous client without documenting that the scope of representation has ended;
- representing one party only when joint representation is sought;
- representing multiple parties;
- representing opposing parties; or
- acting as both corporate counsel and board member or corporate director.
All of the above situations should trigger your concern about potential conflicts of interest. But unfortunately, in such murky facts the proper course of action is not always clear. Acknowledging that there may be a conflict of interest is the first step toward finding a responsible way to handle the dilemma.
Once you identify a potential conflict of interest, the next step is to determine whether the conflict properly may be waived. Again, this is not always clear. Consider your available resources on conflicts of interest. Look to the rules of professional conduct. Call local colleagues who may have faced similar situations, and ask how they responded. Call your state bar’s ethics counsel or bar counsel. Call your law school ethics professor. If you are lucky enough to have a malpractice carrier that provides risk management services, then call your carrier’s risk manager. Other resources might include the ABA, the ABA/BNA Lawyers Manual on Professional Conduct or the Restatement of the Law Governing Lawyers.
To be overly simplistic, the issues really become: how might the client or clients be harmed by the representation, and can you take adequate steps to avoid causing any harm?
If harm is likely, you cannot ask the affected clients to waive the conflict, and you cannot go forward with the matter. But if the conflict appears to be one that the client properly may waive, you should make certain that you obtain informed consent before moving forward.
Informed consent is not simply a statement identifying that a conflict exists. It is not just a signed acknowledgement. The waiver should cover issues such as what the conflict or potential conflict is, how the conflict may harm the client, what steps you will take to avoid harming the client, and what will happen if the conflict develops further (for example: what could force the attorney to withdraw). These factors make up an informed consent, and they always should be expressed in the written waiver of conflict.
Conflicts of interest should not be taken lightly. You should not dismiss the issue because of familiarity with a long term client (i.e., "they would never sue me"). You should not ignore it on the ground that addressing potential conflicts takes up too much time. You should not overlook conflicts merely because the matter represents billable hours for you. Conflict of interest claims are real, they are legitimate, and they can result in a significant loss. Stop to reflect upon whether a proposed new matter might give rise to a conflict of interest, and if it might, then deal with the situation responsibly.
Finally, remember that there is an alternative course of action for an attorney facing a conflict of interests. Experience has shown me that attorneys can and do feel obligated to take new matters that make them uncomfortable – primarily from an admirable but perhaps misguided sense of loyalty or responsibility to a client. Take the time to ask yourself whether that new matter with a possible conflict of interest truly is something that you want to handle. You are not obliged to find a way to navigate through conflicting waters. Sometimes, just saying "no" is the best way to go.
Previous ALPS Risk Management Articles:
ALPS Application for Professional Liability Insurance
Subscribers Only
