Attorneys sometimes perceive conflicts of interest as impediments to taking on new business. However, they can also lead to high verdicts in legal malpractice cases, given how a breach of the duty of loyalty can be an easy concept to explain to a jury.
Most attorneys are well-versed in navigating traditional conflicts, by running conflicts checks for new clients or new matters. However, there can be potential conflicts created outside the traditional attorney-client relationship. These can create greater risks because sometimes they may go unnoticed.
Providing casual advice or creating attorney-client relationships outside the bounds of proper documentation can create conflict issues. Below are a few of the most common circumstances from which unexpected conflicts materialize.
Unexpected Attorney-Client Relationships
Most law practices have clearly articulated file-opening procedures that include both client intake procedures and the resolution of potential conflicts of interest. In most circumstances, effective practice procedures begin with one important step: properly identifying the client.
Not every attorney-client relationship begins with a prospective client who walks in the door and asks an attorney for legal services. Sometimes attorney-client relationships are implied from the facts and circumstances surrounding a pattern of communication between an attorney and someone else. More and more, these kinds of implied representations are becoming more frequent.
Requests for legal services and the responses could arise in a casual conversation, through an in-person social interaction or online website, rather than in connection with a formal engagement of legal services pursuant to an engagement letter or fee agreement. Even if the attorney believes it is a casual conversation, if the inquiry involves the seeking and rendition of legal advice, it can be the basis of an attorney-client relationship—at least for purposes of the attorney-client privilege or even for a potential conflict of interest. Typically, courts reviewing this issue consider it from the perspective of the potential client.
Imagine this scenario: A former roommate reaches out to an associate at a law firm and asks for a favor, asking how a tenant can force a landlord to return a security deposit. The associate replies with the appropriate citations to the rules regulating security deposits and the related draft language for a legal demand. The former roommate then forwards the email with the associate’s language to the landlord. As it turns out, the landlord is a client of the associate’s law firm. It is not difficult to imagine the headaches created by this scenario, even if the associate did not intend to be acting as his friend’s formal attorney.
Attorneys are frequently called on by family members or friends to give “friendly” advice in situations like the above. In so doing, it can be difficult for an attorney to remember to follow the conflict-of-interest identification and resolution procedures of his or her law firm.
Thus, many attorneys facing this issue will either view it hypertechnically — by reviewing the proper “new client” intake procedures to ensure there are no potential conflicts — or by having the direct, and sometimes awkward, conversation, noting that the attorney cannot give any legal advice without taking additional steps. Some acquaintances or family members may be surprised by such a response, but it may help save headaches or even hurt feelings down the road.
It is possible to mitigate some of this risk by modifying the footer on all emails to make clear that no attorney-client relationship exists in the absence of an executed engagement letter or fee contract. While this may provide some additional protection against a legal malpractice claim, it may not provide any relief against a motion to disqualify or a bar grievance based on a conflict of interest.
Theoretically, identifying clients before the rendition of any legal services should be easy enough. The tough part for some attorneys, however, is the degree to which a single representation involves more than just one client. When that happens, the representation may actually be a multiple representation requiring all of the associated conflict resolution procedures.
The best example of such a situation involves representations in the probate context. It is possible that an attorney is asked by one person to simultaneously represent the executor, estate and beneficiary of an estate. Or an attorney may be asked to represent both the president of a closely held corporation and the corporation itself.
In each situation, it might appear that all of the potential clients are in reality a single person or legal entity. Yet, for purposes of the conflict-of-interest resolution procedures, each separate capacity and each separate entity may be a separate client. When that happens, if the interests of the various persons or entities are distinct, the law firm may need to comply with the multiple-representation conflict-of-interest resolution procedures.
If the interests of the various clients in the block differ, then the law firm can attempt to obtain the appropriate consent to the multiple representation in accordance with the rules.
There may also be situations in which the conflicts cannot be resolved with full disclosure and informed consent; these situations can be very dangerous for risk management purposes but will only be uncovered if the attorney knows to identify each client to the representation.
Always Follow the Rules
Although the conflict rules are not complicated, they can be difficult to apply to nuanced factual scenarios. In addition, the risks of noncompliance can be great for attorneys.
Most law firms will require that, before a matter can be opened or time billed, attorneys must identify each client for every new attorney-client relationship and follow standard intake procedures for each one. For many firms, this includes both running a conflicts check and issuing an engagement letter.
Conflicts can arise in unexpected places. However, by following standard procedures in every new matter and thinking critically about providing advice in an informal manner, attorneys can stave off some of the problems that conflicts can create.
Shari L. Klevens is a partner at Dentons and serves on the firm’s U.S. board of directors. She represents and advises lawyers and insurers on complex claims and is co-chairwoman of Dentons’ global insurance sector team. Alanna Clair is a partner at Dentons and focuses on professional liability defense. Klevens and Clair are co-authors of “The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance.”