Risk Update

Lawyer Lateral Hiring Week (Part 1) — On Prudent Due Diligence

I’m fascinated by the vetting (or lack thereof) that goes on in evaluating lateral hires. So this article naturally caught my eye. Here are some key highlights from: “INSIGHT: Do You Really Know Everything About That Lateral Hire?” —

  • “When it comes to lateral hiring, no process, no matter how thorough and strictly employed, can guarantee complete safety against malpractice actions or impenetrable defenses to a suit arising from a pre-hire error, write Hinshaw & Culbertson attorneys. They recommend both pre- and post-hire actions to reduce risks.”
    “Among the most harmful threats to the fledgling relationship is a claim against the hiring firm arising from the lateral’s alleged pre-hire negligence.”
  • “At a minimum, due diligence before inking the deal is critical. Inquire whether the candidate has been a party to prior claims, lawsuits, or disciplinary matters. Verify the answers with docket searches and other on-line investigation. A simple internet search can uncover issues that might later blossom into costly claims.”
  • “Of course, conflicts must be investigated. Note that Model Rule 1.6(b)(7) contains a limited exception to client confidentiality for the purposes of assessing conflicts of interest arising from a lawyer’s change of employment… The hiring firm should also review and assess the clients and matters that the lateral attorney is bringing to the firm. This includes determining whether any errors might have occurred.”
  • “Firms can take advantage of other loss-control measures even after satisfactory completion of due diligence and the actual hiring of the lateral candidate… The firm’s client intake process also provides loss-control opportunities. For instance, the hiring firm should enter into new engagement agreements with the incoming clients. In addition to mapping out the new firm’s unique terms and conditions, the agreements could more precisely limit the scope of the firm’s representation, carve out specific services that the firm will not provide, or identify a default event that signals the end of the attorney-client relationship… Before doing so, Model Rule 1.8(h), which limits lawyers’ ability to make an agreement prospectively limiting malpractice liability, should be carefully reviewed.”
  • “Finally, during the lateral assessment and hiring process, consider seeking guidance from your professional liability insurance broker or carrier. Both brokers and carriers will have knowledge of and insight into the available insurance products and what coverage issues might exist.”