Risk Update

Lawyer Lateral Hiring Week+ (Part 5) — Lateral Lessons from the Recent Past

Last week’s look at laterals was definitely a hit. Never one to live within artificial constraints, I felt it worthwhile to extend things, thanks to an update sent by Chuck Lundberg. This analysis from 2017 reminds us that these issues are not new, with links to several relevant stories and examples: “Quandaries and Quagmires: Carefully vetting lateral partner candidates” —

  • “It’s the end of July 2017 — the bar exam was last week — and the hottest trending topic in legal ethics and risk management right now is this: How badly some law firms have screwed up in vetting new lateral partners. Here’s just a sampling of the most recent headlines in the legal press about lateral hire disasters:
  • “And the cost of a bad lateral hire can be substantial — two to four times the lateral’s annual compensation. And that doesn’t even account for some intangible costs that could be far more expensive to the firm:
    • Like the expense of an unforeseen motion to disqualify your firm from a big case based on an undetected imputed conflict triggered when the lateral walked in the front door.
    • Like losing one or more clients who choose to retain new counsel rather than stay with you and fight the DQ motion.
    • Like the fact that your malpractice insurance carrier may perceive an increased underwriting risk in your firm’s lateral hiring practices (translation: higher premiums).
    • Like the incalculable internal cost to the firm from bringing in a culturally incompatible partner.
    • Like the unexpected telephone call from the respected judge who has always been a friend of your firm, who quietly asks why in the world you would hire that lawyer as a lateral.
  • “And trust me about this: When a lateral does flop spectacularly, you do not want to be the subject of this angry question among your partners: ‘Who was the genius who wanted to bring that lawyer into the firm?'”
  • “All of which is not to say that firms should not engage in lateral hiring. A carefully chosen lateral partner can be worth his or her weight in gold… But the decision to hire a lateral must be done with great care, with a full understanding of how badly it could go wrong. The vetting process is neither easy nor quick.”
  • “Treat lateral due diligence as seriously you would an M&A transaction for a client; many firms spend hundreds or thousands of hours vetting such a transaction, and lateral vetting should be no different.”
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