Much of what is written regarding conflicts of interest is directed toward justifying the need for conflicts checking systems, describing how to use those systems or identifying what information must be tracked in them. There doesn’t seem to be much written about what to do once a conflict has been identified. The focus of this article is to discuss accountability for the conflict of interest decisions that attorneys must make.

What should happen if there is a match with a name in the conflicts database? The conflict concern should initially be brought to the attention of the intake attorney. In firms that routinely and systematically check for conflicts, this happens. But is this action in and of itself sufficient? I would suggest that it is not, at least for some of the conflict “hits” that arise. Here’s why. An identified conflict will occasionally put the intake attorney in a potentially precarious situation. In some cases, there is no bright line rule upon which to draw in deciding whether it is permissible to move forward after a conflict has been identified. Combine this situation with a potentially significant legal fee and the dilemma becomes clear. When faced with a potentially serious conflict concern and a potentially significant legal fee, reasonable minds may not always make responsible decisions. Personal desires and financial pressures can sometimes cloud one’s thinking. Unfortunately, and for this reason, leaving all conflict resolution decisions entirely up to the intake attorney’s discretion may result in exposure for the law firm. Firms are sometimes surprised to learn that a significant conflict concern arose and the intake attorney moved forward on his own when he should not have. There was no accountability to the firm for conflict resolution. There has to be, and there is, a better way.

If there is a match with a name in the conflicts database and it is not immediately apparent that the firm is conflicted out, the conflict concern should be brought to the attention of the intake attorney and the partner or departmental chair responsible for conflict resolution. The vast majority of conflict hits will result in a relatively immediate sign-off as the intake attorney can readily explain why the name match is not a concern. 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. Not only will the conflicts resolution attorney be able to counsel the attorney who may have the conflict, she will also be able to make the ultimate conflict decision on the part of the firm, if necessary. This 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 be warranted. Some firms have an in-house ethics counsel. For those firms that don’t, looking outside of the firm may be necessary. A call to a law school ethics professor, bar counsel, a malpractice insurance defense practitioner, or another colleague are all reasonable suggestions. In addition, a review of the applicable rules of professional conduct will often provide further clarification.

However, even given the above reasons, some attorneys may still argue that the overall risk doesn’t justify the effort. To them I would say, “Have you considered the exposure issues that may come into play on a conflict of interest malpractice claim?” The result of some conflict of interest claims is that the firm must disgorge its fee related to that matter. You cannot profit from a matter that you should never have been involved in from the start. Legal malpractice insurance policies do not cover disgorgement of fees and the fees in question can be substantial.

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 renewal periods pass during the time of client discontent or if coverage is placed with a different carrier in the interim, the malpractice insurance carrier may deny coverage. Why? From the malpractice insurance 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 that 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.

I strongly believe that the practice of law is a profession. However, the running of a law practice is a business, and businesses need to have built-in accountability procedures. When you stop to think about it, this just makes good sense.

The Risk Management Report is not legal advice. It does not, and is not intended to, respond to any individual situation or concern. The reader must conduct independent research and analysis to determine the constraints and best way to act for each matter in each jurisdiction.