All lawyers should make a habit of checking for conflicts

After working hard to bring in a new client or a new matter, many attorneys find it difficult to accept the possibility of losing that new work because of a conflict. Although having to turn down a matter due to a conflict is sometimes difficult, it is critical. Indeed, unidentified or unresolved conflicts can lead to severe consequences, including lost clients, malpractice claims, and bar complaints.

Nonetheless, some attorneys are so eager to begin work on a new matter that they fail to perform even a basic conflicts check. As a result, legal newspapers are full of reports of motions to disqualify or claims against attorneys based on conflicts. Even worse, because a conflict implicates the duty of loyalty owed by attorneys to their clients, a claim based on conflicts is typically asserted as a claim for breach of fiduciary duty. Such claims are not only expensive to defend, they can also lead to substantial verdicts rendered by unforgiving juries, including the possibility of punitive damages.

Rather than face these risks, attorneys are better served by running conflicts early and often. A representation that begins with an unresolved conflict can poison the entire representation, as a court or bar may conclude that it is impossible for the attorney to unlearn the confidences and secrets obtained during the representation of a client.

Accordingly, most law firms will identify and address conflicts before the attorney-client relationship begins. This can be done through a two-step process that includes first identifying potential conflicts and then, if necessary, engaging in further analysis to determine whether there is in fact a conflict that requires client consent or, in some situations, requires the attorney to decline the representation.

Utilize Conflicts Systems

While many firms have systems in place for checking conflicts, the problems arise when attorneys operate outside of those systems and begin work on a matter without first running conflicts. Inevitably, it is the time when an attorney believes that there is justification for skipping or delaying a conflicts check (e.g., when the matter is particularly urgent or important) that ultimately creates a problem. Accordingly, law firms should strive for 100 percent compliance with their conflicts procedures and protocols.

The challenge for law firms, however, is to make checking conflicts as painless as possible while still ensuring that the system effectively identifies all potential conflicts. Often, attorneys are unwilling to wait the time it takes to screen for conflicts, and thus may label every conflicts request as “urgent.” This could hamper the conflicts system from being able to respond to all requests within a reasonable time period.

In addition, running conflicts is not necessarily something that is done only at the beginning of a representation. There may be developments in a matter that could justify running conflicts again, such as when a new party becomes involved as a plaintiff, defendant, lender, buyer or seller. In the litigation context, conflicts issues also can arise in connection with the issuance of subpoenas to third parties.

Analyze for Conflicts

While computers can be helpful in identifying potential conflicts, they often go hand in hand with a final conflicts analysis performed by attorneys. For example, an attorney may need to analyze whether there is truly a conflict and, if so, whether that conflict can be resolved. In California, this analysis involves Rule 3-310 of the California Rules of Professional Conduct, which provides that attorneys cannot represent more than one client in a matter where the clients’ interests either potentially or actually conflict without obtaining the informed written consent of each client.

With respect to analyzing potential conflicts, the inquiry differs depending on whether the issue involves a “successive representation” or a “multiple representation.” A successive representation refers to a potential conflict between a current (or prospective) client and a former client, while a multiple representation involves potential conflicts arising out of the representation of more than one client. These concepts are often the source of confusion but, for most matters, the applicable analysis should be readily apparent.

However, there are situations where the conflicts analysis can get much more complex. For example, difficult conflicts issues can arise in probate litigation (representing the executor, estate, heirs, etc.); securities litigation (representing both the corporation and the directors/officers); domestic litigation (the parents and the children); and bankruptcies. In all situations where there may be more than one client, the key question that most attorneys will ask themselves is: “are there things that I might do differently if I represented only one of the clients as opposed to both?”

If the answer is “no,” then typically there is no conflict that would prevent the attorney from accepting or continuing a representation. If the answer is “yes,” however, then a more thorough analysis may be required. This analysis may include a consideration of whether the attorney can “adequately” represent the interests of all clients, or whether the interests of one client necessarily affect the interests of another client in an adverse manner.

If there is no actual conflict, then the attorney can likely proceed with the representation after obtaining the informed written consent of each affected client. The question of what constitutes “informed written consent” varies depending on the circumstances, but attorneys can generally make sure that the client is fully aware of the potential issues.

While a conflicts analysis may seem daunting, in practice the process of reviewing a matter for conflicts is typically straightforward. Instead, the most difficult part of running conflicts is simply having the discipline to do it for every new matter and as dictated by changing circumstances in a matter. Without such discipline, the happiness that comes with getting a new matter can quickly turn into a major headache.