On demand 1h 51s Basic

Ethical Conflicts

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Ethical Conflicts

This course reviews the ABA Model Rules of Professional Conduct regarding conflicts of interest from a law firm risk management perspective. Various sources of conflicts-based risk will be explored and best practices/defenses will be examined. Logistical realities and actionable steps to better protect law firms and lawyers will be discussed.

Transcript

Hello, welcome to Ethical Conflicts. I'm Jeff Cunningham from Goldberg Segalla. Today we're going to be talking about conflicts of interest, obviously, and conflicts of interest really are not a question of if, but when. Conflicts of interest are consistently one of the leading sources of legal malpractice claims. And they're particularly challenging to dispose of early coupled with attorney discipline, they really make up a major part of risk to law firms. And last year, we saw one of the largest law firms in the world, perhaps the largest law firm in the world, that has a robust, very robust conflicts department get hit with a legal claim over $30 million based off of a conflict of interest. It was appealed and affirmed. So, you know, this is a major source of risk for large law firms and for smaller law firms alike. Conflicts are more than just the opposite sides of the V the plaintiff first defendant that is so traditional. And what we you know, what we really think of as the direct conflict of interest. But today we're going to really dive into the sources of conflicts and major areas of concern and sort of where you can get your most return on investment for focusing on conflicts. I'd be a pretty sorry ethics attorney if I didn't point your attention to my disclaimer at the bottom. Prior results do not guarantee a future or similar outcome and no attorney client relationship is formed. And this material does not constitute and should not be considered legal advice. Looking at the course we're in the intro, I want to talk about risk to law firms generally. I think that always sets the stage, scare us all a little bit into paying attention, the rules and we'll be discussing the model rules. But of course, your jurisdictional rules are going to be absolutely key. The logistics of conflicts and how the logistics kind of the nuts and bolts of your conflicts check your systems, really how that can impact the ethical side of conflicts, but also the risk to your practice, your law firm. I'll talk about my method and my method is based on education systems, plans and teams. I like to keep it really simple, really actionable. I find that the best system in the world, if it's not used, is is way worse than a decent system that is sort of used, You know, actually getting things to be used by your people is really the most important part. So getting that buy in and getting your team behind what you're trying to do is absolutely key. Some action steps that you can do today that you should do today to, you know, address conflicts and make your practice better and safer and then some resources that are available to all of us. I encourage everybody to start using those resources today, use those resources. They're they're typically free and typically really, really helpful and underutilized, I find. And then we'll wrap it up with a conclusion and a soft sell. So this is me, Jeff Cunningham. I'm a partner at Goldberg Segalla, based out of White Plains, New York, just outside of New York City. I also work in our Hartford, Connecticut office, and I'm an attorney in New York and Connecticut. I defend lawyers and law firms sued for legal malpractice or facing ethics, grievance, attorney discipline and grievances. And I also serve as outside general counsel to law firms, typically small, solo, small and mid sized firms, and usually on a fractional basis, because smaller firms don't generally need a full time 24 over seven general counsel. But trying to get proactive with risk management. Again, I apply a rather simple method to address large areas of ethics and legal mal and other risk. Based on what we've seen in the industry over the past 20 years, 30 years trying to score the biggest return on investment for firms to protect themselves and and really get ahead of problems before there's an ethics complaint or before there's a legal complaint or any other claim. So talking about the risk, there's some hard truth that I think lawyers are. Um, a bit psychologically. A bit. A bit head in the sand about. And the hard truth is, according to the ABA. Attorneys have an 80% chance of being sued for legal malpractice over the course of their career. That number seems extremely high to me. And I know a lot of lawyers who have been sued for legal malpractice. I would have guessed the number is closer to 20% rather than 80%. I don't know the methodology that's from the ABA's a 2016 article in the ABA's Journal. And you know, it's it's regardless of the methodology whether you know maybe they just surveyed 8 or 10 lawyers and said yeah I've been sued for malpractice regardless of the methodology. The statistic is an important what's important is, is sort of the shock value is your chances of being sued for legal malpractice or facing an ethics complaint are way higher than you think. I find that almost every lawyer I know, lawyers I work with, client lawyers and just lawyers who are colleagues and friends underestimate their risk. And so these next few slides are really to attempt to open our eyes and realize that the risk is out there. So this first slide shows percent of legal malpractice claims by firm size. And this is from the ABA's profile of legal malpractice. It's a it's put out every four years and the new cycle should be out in October. So this data is pre-COVID. I don't expect there'll be dramatic changes to the slides, but it'll be interesting to see what impact, if anything, Covid has had on sort of the conventional risks that lawyers and law firms face. And looking at our our pie chart here, solo practitioners make up one third of all legal malpractice claims. Small firms of ten lawyers or less make up 72% of all claims. And large law firms with 100 lawyers or more make up just 10% of all claims. Now, you know, there's there's a lot behind these statistics. Practice area has a lot to do with it. Geographic location has a lot to do with it. And the very nature of small, firm practice, I think has a lot to do with it. On top of all that, most lawyers are in small firms in the US, 60 to 70% of lawyers in the US practice at law firms with ten lawyers or less. And the bulk of those are solo. So, you know, there's again, the actual numbers, the actual statistics aren't as important as sort of the eye opening truth here, that smaller firm practice is risky. And then much of my work is based on looking at what those 100 plus lawyer firms are doing. Using my experience as working for the general counsel of some 100 firms and. Adapting that to smaller firm practice to the extent that that it can be done. Now, it's not to say that large law firms are safer, mid-sized firms are safer, but this is just the reality by number of claims and firm size. So a little bit more hard truth is. The percent of claims by practice area. And this sort of goes hand in hand with firm size. Plaintiff's personal injury and personal injury defense make up 22% of claims. Family Law 13%. Real Estate trusts and estates Business Commercial make up over 10% each. And these are all areas that are typically done by smaller practices. But again, the the shock value sort of over shadows, the actual numbers here in that the type of work you're doing is a huge determining factor of the kind of risk you have. And if are practicing more than one type of law, that risk goes up exponentially. So the general list, again, very common in solo and small firms. The generalists who sort of doing a bit of everything is way riskier than someone who's focused on real estate work, for example. So dabbling is a huge, huge gateway to risk and something to be aware of. And then the hard truth, you know, more and more technology is consuming the practice of law. And there's a lot of good to that. There's a lot of bad to that. This chart shows cyber risk, cyber breaches specifically by firm size. And this was disclosed self-reported by law firms. So I think these numbers are suspect. They're probably a whole lot higher. And self-reported also suggests that the law firms actually know if they have a cyber breach. And many firms that say they don't have any cyber issues just don't know if they're part of a man in the middle attack. If some bad actor has access to their system and is using it for whatever nefarious means. Bad actors will use their system for. So as you can see from the chart, the sort of danger zone is the mid-sized firm, 50 lawyers to 99 lawyers. The bottom is the number of lawyers in the firm. The y axis. And that's as close to math as I'll get today. The y axis. Actually, that might be the x axis. I don't know. The vertical one shows percentages based on the number of claims reported by those firms. And so there's a steep increase as firms increase in size until that mid-size 50 to 99 lawyers. And then there's a decrease. And I think that decrease is really based on large law firms being able to invest in cybersecurity and other tech resources to protect their firms in a way that small, smaller firms aren't able to do. The last of our risk slides is going to be about attorney wellness, and our statistics are abysmal. Over 10% of lawyers self-report suicidal thoughts. And again, that's self-reporting. So the actual number I think is substantially higher. According to the ABA, around 55% of all disciplinary and legal malpractice claims involve attorney mental health and or substance abuse. About a third of lawyers self-report depression or anxiety. You know, it's the numbers compared to other professions or the population in general are just abysmal. Um, substance abuse, mental health across the profession, it really is a problem. And aside from being just a professional problem, it's a huge source of risk. Over half of all legal mal and attorney discipline cases involve attorney wellness, and I think that number is probably probably low. That percentage is probably low in my experience. I mean, aside from the truly. Uh, borderline frivolous legal claims I've seen or the ethics complaints that are filed by a disgruntled person. And there's really no basis to it. But if there's any basis to the claim at all, I think the percentage, in my experience, is probably a lot closer to 100% of the time that there's something else going on. Now, wellness can be broadly defined, right? Substance abuse is one thing, but mental health, you know, stress, anxiety, depression, these are things everyone has to battle with, especially in stressful professions like practicing law. So, um, you know, I think, again, the actual percentage doesn't really matter. Just understanding the connection between attorney wellness and risk is really key. And. So putting together ethics and malpractice, I really like the the dart board. Um, think about ethics on malpractice. I'm a big fan of darts, so I guess that's why I like it. But if you look at the dart board and think about our professional responsibility, our ethics rules as the white spaces and risk specifically legal malpractice, but other firms as the black spaces, um, to the extent you don't know anything about darts, the two rings, the red and green rings, the inner ring and outer ring. The inner ring is the triple score and the outer ring is the double score. And then of course, you've got the bull's eye, red and green at the dead center. And, you know, it's those triple and double rings that I see ethics and malpractice overlapping. So your malpractice risk and your ethical obligations taken separately. There's a lot of risk there and there's a lot of work for lawyers to do, a lot of duty to meet. But when you fold them together in those double and triple score areas, the risk gets amplified and conflicts of interest sort of sit in that space. They're kind of the biggest overlap between our ethical obligations and rules of professional conduct and risk to law firms. What I really like about the dart board idea is lawyers are at the bull's eye. Lawyers are the target of both and the client is the dart in the legal. We'll talk about this briefly, but in the legal malpractice context, generally only your client can sue you for legal malpractice. Likewise, clients are a major source, the major source of attorney discipline and grievances. And they're the complaints that tend to have some teeth. You know, any anyone who has Internet access now can can file a grievance against an attorney, but they typically don't go all that far except when made by clients. Clients are a huge source of attorney discipline risk as well. So the dart board really helps kind of keep that in perspective and just put the dart board in the back of your mind as we discuss the rules in detail today, that we're looking at the risk from both the ethical standpoint and the legal standpoint. So legal malpractice, you probably have heard the claim described as the case within a case. And that's why we have that graphic of a smaller briefcase inside a larger briefcase, The case within a case, it creates a high burden on the client to prove that. But for typically the lawyer's error, they would have won or done better. And it applies equally to litigation where you have a traditional case, but also to transactional work where there's a deal. It is very challenging for clients to successfully sue their lawyers, which is great for us and me as someone who defends lawyers. But. It sort of frames the entire the entire perspective of the legal malpractice risk and the elements of legal malpractice. There are obviously jurisdictional, but looking at them from the broader US perspective, there's privity is required. So again, only your client can sue you for legal malpractice. There are exceptions. And if you go out to the California side of the spectrum, there's a near privity that's allowed, especially in the trust and estates context. But we see it in other areas where there's a known beneficiary, where the lawyer knows that a non client is relying on the lawyer's work product in some way. As you get closer to New York where practice privity is stricter and that near privity exception exists but is much, much more tightly construed by the courts. The second element is the breach. So the act or omission by the lawyer fell below the standard of care. Generally, that standard of care is going to require expert opinion, although in some instances like this statute of limitations, the jury can can decide that that's below the standard of care. And in certain jurisdictions, the court can actually act as expert opinion, as the expert in that instance and decide if something fell below the standard of care. Some jurisdictions also require a certificate of merit or an affidavit from a practitioner before the suit can even be brought saying, you know, as alleged, this conduct did in fact fall below the standard of care. The standard of care is a bit amorphous. And typically it's it's looked at from a somewhat subjective standard of a reasonable practitioner in the same circumstances of the lawyer. So I always describe it as the difference between a general practitioner up in Plattsburgh, New York. If you're not familiar with Plattsburgh, New York, it's a beautiful town way up on the Canadian border, and it's very rural. You know, they have lawyers, but not too many. So a general practitioner up there solo doing a house, closing for a first time home buyer versus a Manhattan real estate moguls. Um. Lawyer who part of a major Manhattan law firm with hundreds of lawyers and does billion dollar deals all the time. There's two different standards and it's not to say that the generalist up in rural New York is going to be allowed to, you know, make errors without repercussion. But the sophistication, the experience, the community, all of that sort of goes into the calculus of the standard of care. Then the third and fourth elements are sometimes combined in some jurisdictions, but I think it's helpful to break them down. The third is proximate cause, which is typically looked at, but for cause. So but for the attorney's act or omission, the damage wouldn't have happened. And there has to be some connection. I think the innocence requirement and the criminal legal malpractice context really explains proximate cause in the legal context. If a criminal defendant is found guilty by a jury or pleads guilty, takes a deal, then that has to be. That guilty verdict has to be dealt with before the criminal defendant can sue their attorney for legal malpractice. The idea being only guilty people are found guilty or plead guilty. A bit of a legal fiction, but so actual innocence has to be demonstrated before the criminal defendant can sue their lawyer because nothing their lawyer could have done caused them to go to jail. They went to jail because they committed the crime. So that sort of demonstrates the the proximate cause connection. And then the fourth element is damages. And the damages have to be typically actual ascertainable dollar damages. So non-pecuniary loss like emotional damages, loss of liberty, things like that are not generally generally recoverable. Some jurisdictions allow them to some extent, and it also can sort of the door can be opened a little bit if those those types of damages are specifically what the lawyer is working on. And then there's other risks out there. And other risks to law firms can range from a slip and fall in the lobby to a contractual dispute with a vendor. But really, you know, again, from clients, we see breach of contract claims, breach of fiduciary duty claims, aiding and abetting crops up a lot, traditional negligence claims. So lots of other claims can be used in statutory claims depending on the jurisdiction. And so the risks aren't purely in legal malpractice, although typically, if you know, a cause of action is labeled something else. But it really is still a professional negligence claim, those duplicative claims will be dismissed and the court will limit the claim to legal malpractice. Breach of fiduciary duty is an interesting one because our duties to clients are broader sometimes than traditional legal malpractice, and there can be allegations of negligence in our acts as a fiduciary. So looking at ethics from a big picture, the sources of our professional ethics, today we'll be talking about the model rules, the ABA model, rules of professional conduct. There are also lawyer codes like the Restatement of Law Governing lawyers. Your jurisdictional rules. So each state, of course, has now adopted the model rules of professional conduct in some form. It was actually, I think, better in the old days before every state adopted the rules of professional conduct. Now, 53 US jurisdictions have adopted the model rules of professional conduct in some form, but no state has actually just adopted the rules. So each state's rules are different. Each state's comments are different. Each state has adopted portions or not of the preamble and scope. And then, of course, going back to our bullet point list, each state is issuing their own ethics opinions based on their interpretation of their set of the model rules, and oftentimes trying to reconcile the model rules with whatever the state used before the adoption of the model rules. And then on top of that, the state's courts are deciding attorney discipline cases and interpreting the rules, sometimes in harmony with the state's ethics opinions, sometimes looking at the ABA's opinions, sometimes coming up on their own. And so it really creates a bit of a mess. The adoption of the rules in piecemeal form across the US has been more challenging than I think anyone anticipated. And then of course, you, your personal ethics, your personal morality and professionalism are a key source of our ethical obligations and will guide you as you sort of navigate this this mess of ethical sources. So today we're going to be looking at all of the conflict rules. And again, we'll be talking about the ABA model rules. Rule 1.7 is sort of the the foundational spot that will begin our discussion with. And it discusses traditional client conflicts, Rule 1.8, diving into sort of specific rules, 1.9 duties to former clients, a huge source of risk and really one that your conflict system should be the foundation of your conflict system should be your former clients. And then from there, it can grow out to protect your firm based on the other rules. Rule 1.10 a little awkwardly numbered. I don't know why they had to do it quite this way, but 1.10 The imputation of conflicts, the rule that sort of creates the need for robust conflict systems. If if conflicts weren't imputed to the entire firm, we might be able to get by with memory or a word document or just searching your email or something like that, something that that's sometimes solo and small firms do in lieu of actual conflict checks. We'll talk about that when we get to the logistics. But the imputation sort of spreads the conflict to everyone associated with the firm. 1.11 special conflicts of interest for government officers, former government officers. And I think this is a really important one because it's often overlooked and it's often overlooked because if you don't happen to have a former government officer in your firm now when you're creating your conflict system, it's easy to sort of brush that under the rug and just keep going. But it deserves attention. And even if you never have a government officer brought in, there's still a lot that can be gleaned from Rule 1.11 that can really assist Rule 1.12 Former judge, arbitrator, mediator, neutrals. That's another one that I think is is often overlooked, if not applicable, when the conflict system is being set up or even just, you know, the. Join the firm at a later date and then sort of 1.12 is crammed into the system. But there's a lot to be pulled out of there while you're setting up your system, while you're revising your system before a former neutral signs on 1.13, the organization as a client often not looked at as a conflict rule. But I think it really is important to frame your conflict system based around representing organizational clients, even if you only represent individuals. It's still a very helpful rule and we'll talk about it in more detail. But there's a lot that can be built into your conflict system and your educational approach to the conflict. Rules based out of Rule 1.13 and then rule 1.14. Again, not seen traditionally as a conflict rule, but representing clients with diminished capacity. I think there's a whole lot we can draw out of 1.14 and use in our conflict system offensively. So for each of the rules, we're going to look at key aspects of the actual text of the rule. Be sure to check your local jurisdictions versions. As I said, every state has adopted the model rules. In part, you have to go back to rule 1.0 and check on the terminology because that that's folded in another another messy aspect of the rules. Not everybody defines the same terms the same way. And then you have to look at your jurisdictions, comments, your jurisdictions, ethics opinions, and then your jurisdictions court cases to to really make sure that you're operating from the right starting point. So diving in rule 1.7 conflicts of interest with current clients. So the key here is directly adverse, right? And the this is sort of the traditional conflict of interest that we all think of, that we learned about in law school, took on the bar exam opposite sides of the V. So those are kind of the easy ones, right? If the client is directly adverse to the other party, that has to be broader than just opposite sides of the V and there has to be kind of a holistic approach to it. I think it's really important not only to have a holistic approach but a practical approach and look at potential political conflicts, business conflicts, philosophical conflicts, you know, using a client centered standpoint to think about how your current client may interpret your representing some other party. And the this really to start things off highlights the importance of a robust conflict system. And again, we'll talk about it more at the logistics discussion. But your conflict system is only as good as what you put in. And even if you're operating from memory, even if you only have one client that you've had for years, it's better to have a system where you can run a search, have everything organized and analyze it, rather than trying to rely on your memory or an email search or something like that, a list, it's just not going to be as effective as if you establish a robust conflict system. That doesn't mean it has to be expensive software. There are ways to create a relatively inexpensive conflict system that can still provide the backstops and the information you're looking for, the redundancy needed to really protect your firm. The key is also a significant risk that the representation of one or more clients will be material limiting, materially limited. So, you know, the significant aspect there is sort of up in the air and that's I think where firms and lawyers often get themselves into trouble. What may start as an insignificant risk can quickly evolve to a significant risk and when things go sideways. Clients who may not have cared about the conflict at the outset suddenly care. So the last important part of 1.17 is that informed consent confirmed in writing. So as soon as a potential conflict is discovered and discovering the conflicts is really the most important part of your conflict system. But as soon as that conflict or potential conflict is discovered, you want to obtain informed consent confirmed in writing from everyone involved. And we'll talk about a little more how to do that. But it needs to be done. At the risk of losing the new potential client, at the risk of blowing things up early is definitely better than blowing things up down the road when the damage has already been done. So Rule 1.8 builds on the current current client conflicts of interest. The and there's a lot in 1.8 business transactions with a client. Very complicated, very jurisdictional. And it's important to remember that your engagement letter is a business transaction with the client. Any time your contracting with the client, you need to step back. You need to run a conflict check. You need to really look objectively at the deal, suggest independent counsel, definitely key. And in certain instances I advise my client law firms to either pay for independent counsel or reduce their rate accordingly to absorb the cost of independent counsel. Again, it's much better to have an issue early on when everyone wants to work together and everyone's sort of thinking prospectively rather than going through the work and some issue developing down the road. And again, when everyone starts out, they're fine with the relationship. But if you don't, if you don't put pen to paper and memorialize that, it can come back and bite. The law firm, it can also come back and bite the client. And, you know, when dealing with clients, the better practice for the firm inevitably provides better service for the client. It does. Protecting your law firm really protects your clients to the. Another key to 1.8 is using client information to disadvantage the client. And that's something that there has to be internal checks in place. And this can be something that not just lawyers, but non-lawyer staff also are using solicit any substantial gift, literary or meteorites. And that really mean you know, the definition of media these days is extremely broad. So that's something you want to have the gifts and the media rights. You want to really make sure that's put in writing and that you, you know, your firm has clear guidelines about the potential for gifts or meteorites and that you've addressed that in advance. But it also needs to be built into the conflict system. If anything of that nature happens, if a gift is made, even an inconsequential gift, the more you know, the the better you are. So you want to make sure you build those things into your conflict system. So five, ten years down the road, you can know, oh, yeah, we did obtain the media rights to this or that. And then financial assistance and sexual relations very, very nuanced by jurisdiction and can be extremely complicated and delicate. This is a great example of where you may need a shadow conflict system and Designated Conflicts Council, which we'll talk about at the logistics step, can be really helpful and really protect the firm. The big risk is that any contract with a client, including your retainer agreement, can be problematic. So you want to look at the independent counsel. Rule 1.9 duties to former clients. Again, this is really the foundation of your conflict system protecting those former clients from new clients you're bringing in. And the key is it's the same or substantially related matter and using that information to disadvantage. And so I see those two aspects of Rule 1.9. You know, they're sort of in opposite, right? They they. One, it's limited by the substantially related matter. So whatever you represented the former client on is really limited. At the same time, using the information from that former representation really broadens and sort of destroys any boundary put around it. So it's important to think about rule 1.9 in a very broad sense. And the big risk is prospective clients, your prospective clients that come in that don't engage the firm need to be built into your conflict system. And you know those duties to prospective clients in many ways echo the duties to former clients. So something to make sure that that's built into your your conflict system. Rule 1.10 The imputation of conflicts of interest lawyers are associated in a firm per rule 1.7 or 1.9. And the important aspect of that language is that associated is really broad and then waiver by the client. And any time you're getting informed client consent or waiver by a client, you want to have it in writing. You want to again consider. Independent counsel stressed the importance of independent counsel to the client in appropriate circumstances. Consider eating the cost of independent counsel. Paying someone to review a waiver today is going to be a whole lot cheaper than battling a ethics complaint and or a legal malpractice claim years down the road. The big risk is that associated is way broader than. Employed by the firm way broader than the title used per diems contract, attorneys of counsel, even attorney tenants that share or use some of your office space can be problematic under Rule 1.10, and all of those relationships need to be built into your conflict system. Rule 1.11, as I said, often neglected. But I think there's there's a real importance to looking at Rule 1.11. The keys there are for former and current government officers and employees. If there's any sort of conflict, it again can be waived with the government agency's informed consent. Again, get it in writing and 1.11. Imputes the conflict in the same way that 1.10 does. But there are some more exceptions just just based on the reality of the kind of work and relationship that government employees. Government and former government employees can have the big risk with 111. The big advantage, I think that can be drawn from 111 to your conflict system generally is allowing a former government lawyer to be the one solely responsible for for determining this conflict is dangerous. Your firm needs to do its due diligence, and I think extending that to your conflict system really makes for a much more robust conflict system. So many firms, the vast majority of firms I've encountered, run a conflict check. They may have expensive software, they may have conflict staff, they may take their conflicts extremely seriously, which is great. But at the end of the day, the conflicts check is usually signed off by the lawyer who's going to be handling the matter, the lawyer who is bringing in the new client, the lawyer who inevitably is creating the conflict. So remember, conflicts of interest are not a question of if, they're a question of when. And if you look at conflicts of interest that way, you'll you'll sort of, I think, quickly realize that, yeah, that's not the best approach, right? There should be some objective lawyer who is looking at it from the firm standpoint, not from this individual attorney standpoint. There's just really no advantage to having the attorney who has a direct interest in bringing in this client be the one to determine whether or not there's a conflict. Now, 99 times out of 100, there's no problem. And the lawyer is doing a great job and there's no other interest that's influencing the decision. But maybe that 1 in 100, there is some influence and maybe they don't even realize it. Having an objective attorney look at the conflict and be the one to make the decision in conjunction with, you know, the the former government attorney, if you're looking under rule 1.11 or just the affected attorney who's bringing in the new client really can protect your firm. Rule 1.12. Just like 1.11 often overlooked. It deals with former neutrals, judges, arbiters, mediators, other third party neutrals. And the key takeaways from Rule 1.12 are again informed consent confirmed in writing, which is a common theme throughout the complex rules that informed client consent. Whether or not your jurisdiction's rules requires it to be in writing, your firm has to require it be in writing. There's absolutely no upside to trying to get informed. Don't bother getting informed consent if you're not going to get it in writing. It doesn't have to be some kind of sworn informed consent affidavit, a simple email explaining the the conflict issue and whatever you're trying to get the client to consent to and advising the client of their right to independent counsel can be enough in certain instances. You may want to make it a bit more robust. You know it may need a formal letter, may be more appropriate. Something signed by the client would likely be more appropriate in certain situations. But that's that's something to consider, I think Rule 1.12, the prohibition and the exceptions for negotiating for employment with or as a former neutral are really helpful. To be drawn out in the same way that you're going to be doing your due diligence under Rule 1.11. You want to also question whether relying on the former judge et cetera to handle their prior conflicts is really the best approach. And, you know, I think having an objective attorney who. Is paralleling the individual who is affected and sort of looking at the risk from the firm's standpoint is really, really important. The one advantage, I think rule 1.12 has over 1.11 is that you can contract away a lot of that risk. You can have the due diligence done and, you know, you're dealing with, especially in the case of a private neutral, not so much a judge, but you're dealing with someone who should be running conflicts, checks on their own and have access to those. And of course, judges should be running conflict checks as well. But the private neutrals will have should have access to their former conflict systems, and that can be integrated into your conflict system in a relatively seamless and robust way. Rule 1.13. Again, not traditionally seen as a conflict rule, but representing an organization. So representing the organization through duly authorized constituents that can be, again, your jurisdictions rule is going to be key, but that can be a bit of a minefield, especially if you're dealing with smaller organizations, although extremely large organizations, extremely sophisticated organizations can also be challenging. The key is that the lawyer represents the organization, not any individual. And so, of course, the lawyer has to look out for the best interests of the organization. The big risk is Upjohn warnings and making sure that employees of members of the organization top to bottom, understand that you do not represent them or any individual. You represent the organization. And I think that is such an important takeaway. Even if you only represent individuals, you never represent organizations. It's a great reminder to build that into your conflict system. Individuals have spouses. Individuals have parents, individuals have dependents, individuals have business partners. You want to build all of that into your conflict system and you want to make sure that spouses and business partners et cetera. Don't reasonably believe that you represent them as well if you do not. And so, you know, 1.13, even if you don't represent any entities, you only represent individuals I think can really, really help make for a robust conflict system and should be employed. Then rule 1.14 the client with diminished capacity again often overlooked as a conflict rule. And you know, there's a lot of reasons to that. And there's more to the rule than just the conflict side of things. But I think the big takeaway is the lawyer shall, as far as reasonably possible, maintain a normal client lawyer relationship with clients with diminished capacity. Diminished capacity is extremely broad and I think that's really useful from the conflict standpoint. The big risk with 1.14 is, is, you know, in the traditional guardian and diminished capacity client context, almost every diminished capacity client presents the potential for major conflicts risks. And I think that 1.14 is really important to sort of highlight for us that it's not just diminished capacity clients, every single client you have. Brings the potential for major conflict of interest risks. And the only way to sort of get ahead of those risks is to have a robust conflict system in place so that you at the at intake at the outset of the relationship are able to look and say here are our issues. And we we've identified them, we've worked through them, we've obtained informed written consent where needed, and we'll be on the lookout for this and that going down the road. So logistics, no matter how good your conflict system currently is, there is room for improvement. And I always recommend that law firm clients schedule periodic review of their current practices and look, every three months, every six months to see if there's any way that things can be done better and if there's any lessons to be learned from the last review period, any mistakes that have happened, anything that's fallen through the cracks, anything from a client service standpoint that could better serve the clients or better assist the clients in sorting through intake and conflict systems generally, no matter if you have no conflict system whatsoever, you use your memory, a spreadsheet or software, or if you have a conflict department with a conflict counsel and staff, you can and should do better. And there's room for improvement no matter what The two biggest logistical items that you can sort of quickly and easily, I think build into your conflict system is one redundancy. Redundancy really is key to have some other system in place so that one lawyer is not making the decision. One list or software is not your only source of checking your conflicts, having another individual. It doesn't have to be another lawyer. That's great if you can have another lawyer do it. But having another individual also running conflicts checks, also determining, you know, whether they think there's any issues that should be elevated to firm leadership or not. And virtual assistants can be really, really affordable and helpful in doing that, creating that sort of backup and backstop to double check every single conflict check that's done. And then two small audits. So if you're looking at your conflict system every three months or every six months, that's great. Pull three or 5 or 10 or whatever the appropriate number is. Pull a random random sample of conflict checks and see how things are working. Talk to your people. Talk to the ones who are actually doing the conflict checks. See if you know it's an onerous process. If it's relatively streamlined, what they think could be done better, what would make their life easier? Talk to the people actually using it. The best system in the world that sits on the shelf collecting dust is not as good as a decent system that people are actually using. Even if they're using it 60%, it's still better than 0%. So redundancy and small audits are something you can look at adding into your conflict system today that will make your law firm safer and your practice generally better. The the big split. From a logistical standpoint is the manual versus automatic. Right. The person versus the computer. I have the book versus the computer screen with gears popping out. And we've got, you know, on the screen here, we've got the human playing chess against the Terminator. And somehow their kings are both one space away from one another, which can't happen in chess. But whatever, you know, the the in the best. Possible scenario, you would have multiple people involved in every conflict check and multiple automated systems involved in every conflict check. Now, that's not always practical or possible, but I think those are the two sides of the conflict check system that you need to really think about whether your system is pen and paper. I hope it's not or it's an expensive software you've purchased and whether your people are you and your memory, I hope it's not or you and your conflict staff, whatever that may be. Um, you know, this is really sort of the two aspects that need to be addressed. And again, no matter what your system looks like today, it can be improved. So looking at the sources of conflicts, sort of taking all of the conflict rules and merging them together to look at where our sources of risk come from, the sources of conflict are our sources of risk. Clients, of course, it seems obvious, but you want to be sure to build in spouses, affiliates, you know, enemies. If they have a personal vendetta against someone, you know, whatever the personal connections are. And personal doesn't have to be an individual right. It can be a corporate client who has a corporate connection to some affiliates, some parent, some subsidiary. You want to build all that into your conflict system. You're only as good as the information you put in. Likewise, adverse and co parties again seem obvious, but as you learn about the members, principals, affiliates, relatives, whatever of the adverse or co parties or the the party across the table in a deal rather than across the V in a litigation. You want to build those as individuals and entities into your conflict system as well. So you know not just the named party to the deal, but really, you know, who are the principles behind that name party build all that into your conflict system as well or as much as you can. Prospects. Prospective clients that do not engage your firm must be built into your conflict system. There are huge source of risk, and especially for volume practices, it can be really, really devastating. There's duties owed when a prospect comes in and meets with your firm and there's a whole host of other risks that come bundled up with prospective clients. But they need to be a part of your conflict system. Lateral hires are a huge source of conflict risk, and an experienced attorney is ten times more likely to generate a legal malpractice claim experience being 1010 years of experience or more ten times more likely to generate a legal mal claim than an attorney with five years of experience or less. So more experience equals more risk. Now, there's a ton of reasons for that, not just conflicts, but typically the longer an attorney's been practicing, the more clients they have interacted with, the more the broader their conflicts risk is. Now, that's not true in every single case. Some attorneys spend decades representing one or a small set of clients, but typically, the longer an attorney's been around, the broader their conflicts risk going to be the contract per diems. Other part time attorneys have to still be included in your conflicts. Check. This is pretty jurisdictional, but typically it's a sort of standard of known or should have known. So you need to rely on your adjacent attorney to to conduct their own level of of professional due diligence, but at the same time look to contract around that risk and put as much of the legal risk onto that adjacent attorney, that contractor per diem or whatever attorney, as you can, subpoenas, even if they don't necessarily generate a conflict, they can be used. If nothing else, they can be used for Intel purposes. But subpoenas are also important and should be built into your conflict system, subpoenas you send out and subpoenas you receive vendors and experts. Again, probably not going to turn into a conflict under the rules of professional conduct. But Intel is important and it really could hamstring a case for a deal if a vendor or expert you used a long time ago or you dealt with a long time ago has some sort of poor history. It's way better to know that at the outset when that expert turns up again to be like, Oh yeah, you know, eight years ago we had this issue. Way better to know that at the beginning rather than to find out about it when a grievance is filed against you and then your attorneys and staff, your team members, you need to know as much about them as you can and whether they're members of other organizations, whether they own substantial stock in other organizations, their political affiliations and how active they are. Things like that, again, unlikely to be a straight ethical conflict of interest, but way better to know about these things before there's an issue down the road. So intelligence, you're only as good as what you put into your conflict system for conflicts purposes, but also for business purposes and political purposes, PR purposes, whatever. In 5 or 10 years, you're not going to remember any given client and you're certainly not going to remember opposing counsel or some entity that opposed the nonparty. Subpoena one time, build everything you can into your conflict system, and that way you're able to use all of that information in a strategic and effective way. My method, again, is focused on education systems plans and teams and education. I'm a big fan of daily a daily dose of legal ethics to sort of insulate your firm as best you can. And I think I think touching the model rules or your jurisdiction's rules every day is really key. And identifying your common areas of risk and how you can sort of exploit that risk is is really, really helpful. Plans Mistakes happen. No matter how good you or your law firm are, you want to plan for the worst and develop responses to likely or even unlikely risk scenarios. Systems create systems to reduce, transfer, avoid or accept your risks and focus on the areas of your biggest return on investment teams. Use a holistic approach. Right? It's not just lawyers. You want to look at your front office, to your back office, top to bottom. Everyone you employ, everyone who's a part of your firm should be involved in your risk management approach. But don't just stop there. Include clients, vendors, you know, use everyone that you can to diversify and broaden your team, test your plans and systems, Make sure your people are actually using your your systems and plans. You're only as strong as your weakest link. So you need to make sure that your people are actually using your risk management approach. So some action today. Two very simple things that you can start doing or improve upon if you're already doing and that's your conflict system, you can start or upgrade your system. Small simple steps today are way better than coming up with a perfect system that you never actually, never actually employ. So start or upgrade your system. Today. If you're just using memory, use a spreadsheet. Reach out to me. I'll send you my template. I use it as a backup. If a conflict system software goes down, you still have the spreadsheet as a backup. But, you know, if if needed, that's better than, you know, just using memory or searching through email. If you're using software, find another way to use the software and talk to your vendor. See what else your software can do. I'm sure you're not optimizing your conflicts software, and even if you are, start building in non parties subpoenas, start building in experts, whatever you're not doing, there's something else you can do. And then on top of upgrading your conflict system, whatever it is, your conflict council designate an attorney at your firm to supervise all conflicts checks. This should not be the managing partner or the owner, right? It doesn't have to be someone who's reviewing every single conflict. Check that. It doesn't need to be the case. If you're able to do that, that's great. But it does need to be someone who's available to the entire firm who's brought in for waivers, complex issues, someone who's agreed to dive a little deeper into your conflict system and is a available resource for your firm. So building off of that, there are lots of resources out there. I suggest you look to start using all of these today, especially that last one. Me. But taking it from the top. The ABA's Lawyers Professional Liability hotline. If you and your lawyers have not used it before, is great. It's free. You know, there's the phone number. It is an excellent way to check. They are extremely conservative in my experience. And so if you have a gut feeling that you should be checking and you check and they tell you, you know, no, that's that's that's okay under this rule or that opinion, then you're probably good. It's a great quick way to confirm your instincts and your people's instincts. Your state and local bar associations likewise are an excellent source, and many states have their own hotline, which is and even some local bar associations I know have their own hotline, which is great. The other, the ABA does it as well. But state and local bar associations also offer ethics opinions. Some do formal and informal, some just do formal written opinions. But if you have a serious question that goes to the core of your conflicts issues or some other key aspect of your practice, submit a question to the state and local bar associations. It's really, again, typically free and and just a best practice. It's a great way to protect your firm, your firm generally, and your firm's general counsel. So your firm's leadership, whether you're the managing partner or the newest hire at the firm. Unless you're a pure solo, you should have some other lawyers at the firm. And even if you're a pure solo, you probably have some other professionals at the firm that you can paralegal, a trusted assistant. You know, this is one of the biggest problems with conflicts is when they're decided alone in a vacuum and there's just no need to do that. And that applies to really any professional ethics issues and your firm's general counsel. If you don't have general counsel, which many solo and small firms don't, you know that that's understandable. But there should be someone that your firm can rely on for a more complex and nuanced ethics issues and issues of risk. If you don't have anyone, you need to find someone. And I'd be happy to, of course, do that job or help you find someone who's the right fit for your firm. Your insurers. And I think insurers are. A really. Underutilized resource. Your insurers can provide invaluable assets. I mean, you know, your your your lawyer's professional liability insurer is going to be only handling lawyers professional liability issues. So they've seen it before. Their breadth of experience eclipses mine. And this is what I do professionally. They handle so many claims and so many defenses that it's just it's such a missed opportunity not to include them in your risk management plan. And your insurers can be really helpful from the conflict side, specifically in recommending software and recommending conflicts. Counsel in recommending how they've seen other lawyers handle the challenges of a conflict of interest system, other attorneys, judges, professors, mentors, friends. You know, even if you are a solo practitioner or if you're an attorney in 1000 lawyer firm, look outside of your firm to other attorneys that can assist and other attorneys that can provide you, you know, from their personal professional ethics, their opinion. And it's a great way to, you know, validate your take or to decide, okay, you know, maybe I do need to ask my local bar association for an opinion here, because this is this is extremely complex. And then me, my my contact information is at the end of the presentation. I'm extremely active on LinkedIn and really into this stuff and happy to discuss and help out where I can. Thank you so much for joining us. Here's my contact info. As I said, I'm extremely, extremely active on LinkedIn and make a point of providing a daily dose of legal ethics in my LinkedIn blog, but also in meme format. To my knowledge, I have the only model rules based meme page in existence. Some of them are funny, some of them are maybe not so funny, but they're always memes about the model rules of professional conduct, and I would urge you to check those out. You can also find me on Twitter and Instagram or shoot me an email at Goldberg Segalla. Again, I would be a shabby ethics guy if I didn't read out my disclaimers. Prior results do not guarantee a future or similar outcome and no attorney client relationship is formed and this material does not constitute and should not be considered legal advice. Reach out with any questions, comments. I'd love to hear from you and thanks so much for joining me.

Presenter(s)

JC
Jeffrey Cunningham
Partner
McAngus Goudelock & Courie

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