Risk Update

Managing Law Firm and Client Risk — Mitigating Malpractice Risk & More, Attorney Opinion on OCGs, DEI & Secondments

Legal ethics and malpractice expert Chuck Lundberg writes :”Quandaries & Quagmires: Ethical emergencies when a lawyer makes a mistake

  • “Every law firm should have a designated ethics partner or firm counsel, a lawyer who advises the firm and its lawyers when ethics and risk management matters arise. For many reasons, the firm counsel role has become an essential part of managing a law firm.”
  • “For ethical emergencies… firm counsel is the firm’s First Responder — someone designated to respond to an emergency.”
  • “Everyone makes mistakes. A law firm is composed of people; to err is human. Mistakes will happen. Sometimes the mistake has grave consequences. For lawyers and law firms, mistakes can result in claims of malpractice or ethics violations. When mistakes happen, the key for firm counsel is not to compound the error.”
  • “It is well-settled that lawyers have both legal and ethical duties to disclose to current clients material errors or mistakes during the representation. A failure to do so can give rise to liability for malpractice or breach of fiduciary duty; it also can have disciplinary consequences.”
  • “As Hinderks notes, a potential claim between client and lawyer inserts itself as a wedge in the delicate fiduciary relationship of trust and confidence. Indeed, that kind of ‘diverging interests between attorney and client’ is the hallmark of a material limitation conflict of interest, which requires withdrawal of the lawyer and law firm from the underlying representation, in the absence of an informed and effective waiver.”
  • “Malpractice policies typically require timely reporting of claims and known circumstances that might ripen into a claim. The firm’s decision whether and when to report… to the carrier may affect coverages, limits applicable to particular policy periods, and deductibles and self-insured amounts. Indeed, by the time a lawyer starts thinking about disclosing a potential malpractice problem to the client, there is already a legal duty to report it to the malpractice carrier.”
  • “A firm facing a potential malpractice situation should report the claim to the malpractice carrier immediately and request counsel concerning whether, when, and how to disclose the matter to the client. Malpractice carriers will also consider bringing in outside ethics or malpractice experts to assist in fulfilling the attorney’s legal and ethical duties to advise the client in a way that will preserve any defenses to a potential claim.”

Cozen O’Connor counsel Deborah Winokur discusses the American Bar Association’s Model Rules of Professional Conduct; industry clients’ roles in diversity, equity, and inclusion initiatives; and seconding lawyers: “Don’t Let Client Demands Erode Law Firm Autonomy” —

  • “When clients make demands that directly target the hiring practices and criteria used, a law firm’s culture can be shaken. As a self-regulating profession, the practice of law is unique in that lawyers have duties to clients and third parties under the American Bar Association’s Model Rules of Professional Conduct.”
  • “Industry clients have had a significant role in moving the needle on diversity in large law firm settings. Compared to other industries, law firms lag on diversity measures related to women, racial and ethnic minorities, and other groups.”
  • “Over the past 10 years, major corporations have been a driving force behind diversity initiatives implemented by their outside law firms. Some of these initiatives can be potentially invasive and risk jeopardizing attorney privacy.”
  • “If a client’s policy requires that the firm provide detailed demographic information about all billing attorneys, including race, ethnicity, sexual orientation, gender identity, participation in the military, disability status, etc., the firm’s human resources department must confirm with the attorneys that they are agreeable to the sharing of this personal information.”
  • “In addition, in order to protect their lawyers, law firms should perform due diligence about how this private personnel information will be used and stored.”
  • “Certainly, in order to provide diversity of thought and experience, firms must have clear policies that meaningfully involve and remunerate lawyers who are assigned to matters as part of a DEI policy. In addition, as part of their duties to clients, law firms should be sensitive to their staffing needs in light of a client’s DEI policies.”
  • “Another area where client demands relating to, and potentially infringing upon, a law firm’s autonomy is in the area of attorney secondment.”
  • “When faced with a client’s demand to hand over a developing associate, the firm needs to consider a number of factors, both ethical and holistic, in terms of an attorney’s development.”
  • “Furthermore, the seconded attorney must be particularly mindful of the duties of competence and confidentiality.”
  • “In addition, the seconded attorney and the other attorneys at the firm must both be aware of the broad duties of confidentiality. It is possible that the seconded attorney may work on matters adverse to other clients of the firm. For example, the company may be performing in-house research about suing a different client of the law firm.”
  • “The seconded attorney may not share that information with the firm, and may need to be screened from participation in the matters relating to that firm client upon return to the firm.”