Excellent piece from Matthew Henderson at Hinshaw: “Law Firm Best Practices to Mitigate the Increasing Risk of Attorney Disqualification Motions” —
- “It seems as though every day, there is a story in the legal news about a well-known law firm facing a disqualification motion. While disqualification motions are being filed more frequently, that is only half the story.”
- “Such motions are often filed under seal, either by counsel seeking to avoid publicity or clients who do not want to air their dirty laundry (such as employment discrimination claims, white-collar criminal matters, etc.) in a public forum. Additionally, law firms may quietly withdraw when initially faced with a well-grounded disqualification motion.”
- “When a lateral partner moves to a competitor, there is a risk that the partner’s former clients, who may become adverse to the new firm, may file disqualification motions. However, the risk may not be realized unless the new client engages in litigation with the lateral partner’s prior client, possibly months or years later.”
- “The risk of disqualification motions can be considerable for clients engaged in high-stakes litigation. This includes losing their counsel of choice, who are familiar with the case, and having to retain successor attorneys to get up to speed in a complex matter.”
- “Disqualification can likewise lead to a claim for legal malpractice or breach of fiduciary duty, as illustrated in the April 2022 decision of RevoLaze LLC v. Dentons in the Eighth Appellate District of the Ohio Court of Appeals[2]. In the Dentons case, the law firm’s primary sin was allegedly not telling the client about the risk of disqualification early in the attorney-client relationship.”
- “From a risk management perspective, even when a law firm concludes that a conflict does not exist, it should consider disclosing any issue to the client, which could potentially trigger a disqualification motion. It should also explain that while the firm does not believe a conflict exists, the firm wants the client to be aware of the issue and offer to discuss any questions or concerns the client may have. That step prevents the client from later claiming that had it known of a conflict, it would have made a different decision.”
- “To reduce the risk of disqualification motions, some law firms proactively include advance conflict waivers in their engagement letters. Such waivers are more likely to be effective when working with a sophisticated client.”
- “Another risk management best practice is to identify and analyze potential conflicts of interest at the onset of the attorney-client relationship. This is often a labor-intensive process but a valuable risk mitigation measure. It involves reviewing attorney time records and interviewing lawyers to determine the scope of the prior representation and what confidential information the attorneys and law firm may possess.”
- “Given that concurrent and former conflicts of interest are imputed to entire law firms, it is also prudent to have robust screening protocols to ensure that lawyers with potential conflicts cannot access confidential client information on a law firm’s server. Disqualification may be avoided where a law firm can demonstrate that it promptly and carefully screened allegedly conflicted counsel.”
- “However, states take different approaches to lateral attorney conflicts, so law firms must be familiar with the imputation rule in the particular jurisdiction in which the lateral practices.”
“From Roadblock to Opportunity: Rethinking Client Conflict Processes in Lateral Partner Recruiting” —
- “After a robust search, the Am Law 200 firm zeroed in on a perfect lateral partner candidate—a respected litigator with a substantial client base. Over the next several weeks, interviews commenced, questionnaires were completed, and both the firm and the partner were confident that they had found the right fit. But as they approached the finish line, a problem emerged: a conflict with one of the incoming partner’s key clients. What had seemed like a done deal suddenly became complicated.”
- “This sort of scenario is common in law firms today. In my experience as a legal recruiter, client conflict issues, often discovered at the ‘eleventh hour’ of a search, too often complicate, if not completely derail, the hiring process of a lateral partner. There is obviously no way to avoid these issues altogether, but law firms can and should take proactive steps, such as tackling conflicts earlier and more thoroughly during the recruiting process, to address these challenges and realize the potential of their promising new hire.”
- “No matter how diligently a firm and a candidate approach the issue, conflicts can present a significant hurdle in lateral partner recruitment. However, when potential conflicts are left largely unaddressed until the end stages of a search, it compounds the problem.”
- “Indeed, the late identification of conflicts adds considerable stress and work to an already demanding hiring process for both lateral candidates and law firms. Moreover, in some cases, despite early identification of a potentially problematic conflict, the parties move forward with the vetting process on the assumption that they’ll be able to resolve the issue later. This often results in (i) a last minute implosion of the hiring process because the conflict cannot be resolved to the satisfaction of the potential new partner or (ii) a conflict within the firm when the time arrives to actually resolve the issue, hampering the new partner’s ability to bring work in from a key client, thereby undermining the lateral partner’s bottom line and the firm’s business case for the lateral hire.”
- “Another complication with conflicts in recruiting is the wide variation in how law firms approach conflict policies. Some firms take a broad view of conflicts, erring on the side of caution and potentially limiting opportunities for new lateral hires. These firms may prioritize existing client relationships and partner preferences, even when creative solutions could resolve perceived conflicts. On the other hand, some firms adopt a narrower interpretation, actively seeking ways to navigate conflicts through client waivers, ethical walls, or other mechanisms. This disparity in approach can significantly impact a lateral partner’s ability to transition their practice successfully and highlights the need for clear communication about conflict policies early in the recruitment process.”
- “The handling of client conflicts in lateral partner recruitment often reveals deeper cultural and strategic issues within law firms. Two key challenges stand out: the collaboration disconnect and the misalignment between recruitment messaging and business operations.”
- “In an ideal scenario, the relationship partner for the existing client would work cooperatively with the new partner to find a solution, such as obtaining a conflict waiver. Unfortunately, this is not always the way it works out. Some partners may be reluctant to approach their long-standing clients about waivers, fearing it might jeopardize the relationship or impact their ‘credit,’ which could impact compensation.”
- “Another client conflict challenge arises when there is a disconnect between a firm’s recruiting efforts and its business operations. This misalignment, stemming from a lack of early coordination between the recruitment team and key operational stakeholders, leads to conflicts being addressed too late or with insufficient urgency. This, in turn, often results in unfulfilled expectations about conflict resolution that can derail the hiring process at the offer stage or cause problems at the early new hire phase.”
- “To effectively navigate the complexities of client conflicts in lateral partner recruitment, law firms should consider implementing the following strategies: Early Conflict Identification… Initiating preliminary conflict checks early in the recruitment process with a lateral candidate… standardizing the conflict check procedure across law firms. The legal industry could benefit greatly from developing and implementing a universally accepted form specifically for conflict disclosure.”