Denton partners Randy Evans and Shari Klevens
Denton partners Randy Evans and Shari Klevens (Handout)

Lateral hiring is a necessary part of the changing legal landscape, and it can yield mutually beneficial results for both attorney and law firm. For the attorney, a lateral move can improve advancement possibilities, while also potentially providing a greater platform for clients, different work-life balance and better compensation. For the law firm, lateral additions can increase revenue, expand or deepen the bench in certain practice areas and achieve growth objectives.

Of course, lateral hiring brings with it risks. In some situations, firms acquire other firms’ problems without the reward, or with unforeseen conflicts. Many law firms try to prevent unnecessary risk in hiring lateral attorneys by adopting practices, protocols and procedures.

One critical aspect of the lateral hiring process is to clearly define the moment that the candidate moves from being prospective to actual. When a partner joins a partnership or a nonpartner becomes an employee, typically the conflict of interest rules under Rule 3-310 of the California Rules of Professional Responsibility attach and could impute an existing conflict to the hiring law firm (or create a new one).

One effective risk management tool in lateral hiring involves using a signed document between the firm and the new attorney memorializing the moment the professional relationship begins. Other risk management strategies fall on either side of the date of the professional relationship.

Prior to the relationship, however, most firms will engage in some level of due diligence before extending an offer. For most, this process consists of three equally important information-gathering parts.

1. Objective Data

An application or “questionnaire” is the easiest way to obtain objective information about a potential hire. Professional resumes, while a good starting point, may not provide all of the information regarding a candidate’s background that the hiring firm needs to identify potential risks. As a result, many firms use questionnaires that track the moral fitness application for joining the bar. The objective is to gather the basic information necessary to determine whether to invest the resources to pursue the opportunity.

2. Professional Information

Once past the initial screening, the next step is to gather professional information. Many firms combine the last step with this one, but there can be good reasons to separate the two. Biographical information rarely relates to professional duties. On the other hand, the disclosure of professional information, such as current or potential clients, legal malpractice claims history, or the operation of law firms, does. This second step, therefore, may only be appropriate after both the firm and the attorney have decided to move forward.

A supplemental questionnaire might include the following requests:

• Knowledge of any circumstance that might give rise to a claim, including any reported to a current or former insurer involving the attorney;

• Prior claims history, including all reported claims involving the attorney;

• Any declination for legal malpractice insurance coverage;

• Continuity of insurance coverage;

• Prior discipline by any bar organization, court, or government agency;

• Prior litigation, administrative proceeding or criminal proceeding as a party; and

• Any boards, trusteeship, offices, positions or relationships with other entities.

During this step, the firm also may obtain the appropriate releases necessary to conduct a background check if desired, which typically includes criminal history and credit history. Perhaps more importantly, both the firm and attorney will need to exchange the necessary information to perform a conflicts check.

Rule 3-310 of the California Rules of Professional Conduct, which governs conflicts, requires full compliance by all attorneys. Generally speaking, there are two kinds of conflicts—potential and actual—and the distinction between them is important.

Potential conflicts may involve some issue that must be addressed before a lawyer can accept the representation. Often, the issue is some form of consent or waiver from either the new client, another client, or a former client. In contrast, actual conflicts means that the lawyer cannot accept the representation. This type of conflict typically cannot be waived, regardless of the amount of disclosure and consent.

Thus, an effective conflicts check will usually involve the disclosure of clients, adverse parties, and interested parties. As virtually all firms now operate with computerized databases, these searches can be done quickly and accurately. However, a conflicts check is only as good as the information provided. One additional tool is to include the lateral and the lateral’s current firm in the computer search as client, adverse party, and interested party. The key is to identify any potential issues before the relationship begins.

3. Subjective Evaluation

Finally, subjective evaluations are critical in determining whether the lateral will thrive in the firm’s practice. Senior members of firms play an important role in this process. They have an intuitive sense of things that might not fit. Of course, the number of high-level partners involved will depend on the entry level of the lateral. However, at least one is typically involved for any level.

If issues arise during the due diligence process that suggest the lateral hiring could create undue risk for the firm or for the new hire, both the attorney and the firm can decide how to adequately address them in advance of an actual relationship. Depending on the issues and circumstances, additional steps might include conflict waivers, ethics walls, or indemnification agreements.

While the process might appear daunting, it doesn’t have to be. The solution is an effective system with questionnaires, supplemental questionnaires, conflicts checks, and a documented mutual understanding. Together, these tools go a long way to ensuring that the lateral hiring process results in a winning combination.

Lateral hiring is a necessary part of the changing legal landscape, and it can yield mutually beneficial results for both attorney and law firm. For the attorney, a lateral move can improve advancement possibilities, while also potentially providing a greater platform for clients, different work-life balance and better compensation. For the law firm, lateral additions can increase revenue, expand or deepen the bench in certain practice areas and achieve growth objectives.

Of course, lateral hiring brings with it risks. In some situations, firms acquire other firms’ problems without the reward, or with unforeseen conflicts. Many law firms try to prevent unnecessary risk in hiring lateral attorneys by adopting practices, protocols and procedures.

One critical aspect of the lateral hiring process is to clearly define the moment that the candidate moves from being prospective to actual. When a partner joins a partnership or a nonpartner becomes an employee, typically the conflict of interest rules under Rule 3-310 of the California Rules of Professional Responsibility attach and could impute an existing conflict to the hiring law firm (or create a new one).

One effective risk management tool in lateral hiring involves using a signed document between the firm and the new attorney memorializing the moment the professional relationship begins. Other risk management strategies fall on either side of the date of the professional relationship.

Prior to the relationship, however, most firms will engage in some level of due diligence before extending an offer. For most, this process consists of three equally important information-gathering parts.

1. Objective Data

An application or “questionnaire” is the easiest way to obtain objective information about a potential hire. Professional resumes, while a good starting point, may not provide all of the information regarding a candidate’s background that the hiring firm needs to identify potential risks. As a result, many firms use questionnaires that track the moral fitness application for joining the bar. The objective is to gather the basic information necessary to determine whether to invest the resources to pursue the opportunity.

2. Professional Information

Once past the initial screening, the next step is to gather professional information. Many firms combine the last step with this one, but there can be good reasons to separate the two. Biographical information rarely relates to professional duties. On the other hand, the disclosure of professional information, such as current or potential clients, legal malpractice claims history, or the operation of law firms, does. This second step, therefore, may only be appropriate after both the firm and the attorney have decided to move forward.

A supplemental questionnaire might include the following requests:

• Knowledge of any circumstance that might give rise to a claim, including any reported to a current or former insurer involving the attorney;

• Prior claims history, including all reported claims involving the attorney;

• Any declination for legal malpractice insurance coverage;

• Continuity of insurance coverage;

• Prior discipline by any bar organization, court, or government agency;

• Prior litigation, administrative proceeding or criminal proceeding as a party; and

• Any boards, trusteeship, offices, positions or relationships with other entities.

During this step, the firm also may obtain the appropriate releases necessary to conduct a background check if desired, which typically includes criminal history and credit history. Perhaps more importantly, both the firm and attorney will need to exchange the necessary information to perform a conflicts check.

Rule 3-310 of the California Rules of Professional Conduct, which governs conflicts, requires full compliance by all attorneys. Generally speaking, there are two kinds of conflicts—potential and actual—and the distinction between them is important.

Potential conflicts may involve some issue that must be addressed before a lawyer can accept the representation. Often, the issue is some form of consent or waiver from either the new client, another client, or a former client. In contrast, actual conflicts means that the lawyer cannot accept the representation. This type of conflict typically cannot be waived, regardless of the amount of disclosure and consent.

Thus, an effective conflicts check will usually involve the disclosure of clients, adverse parties, and interested parties. As virtually all firms now operate with computerized databases, these searches can be done quickly and accurately. However, a conflicts check is only as good as the information provided. One additional tool is to include the lateral and the lateral’s current firm in the computer search as client, adverse party, and interested party. The key is to identify any potential issues before the relationship begins.

3. Subjective Evaluation

Finally, subjective evaluations are critical in determining whether the lateral will thrive in the firm’s practice. Senior members of firms play an important role in this process. They have an intuitive sense of things that might not fit. Of course, the number of high-level partners involved will depend on the entry level of the lateral. However, at least one is typically involved for any level.

If issues arise during the due diligence process that suggest the lateral hiring could create undue risk for the firm or for the new hire, both the attorney and the firm can decide how to adequately address them in advance of an actual relationship. Depending on the issues and circumstances, additional steps might include conflict waivers, ethics walls, or indemnification agreements.

While the process might appear daunting, it doesn’t have to be. The solution is an effective system with questionnaires, supplemental questionnaires, conflicts checks, and a documented mutual understanding. Together, these tools go a long way to ensuring that the lateral hiring process results in a winning combination.