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Amid Lateral Hiring Frenzy, Don't Forget the Conflicts of Interest Check

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By Joseph Fawbush, Esq. | Last updated on

Faegre Baker Daniels and Drinker Biddle & Reath are currently discussing a possible merger. So are Pepper Hamilton and Troutman Sanders. These are just the latest high-profile examples of an industry increasingly likely to support lateral hiring and mergers. Over 90% of large law firms plan to grow through lateral hiring. With fewer equity partnerships available, lateral hiring has become more attractive to associates, as well. Firm-hopping is simply a part of the industry ­– one that is likely here to stay.

But mergers and lateral hiring are not just the province of Big Law, of course. Lateral hiring and mergers are an important growth option for small and mid-sized firms, too.

The frequency with which lateral moves occur make it tempting to dismiss the threat posed by actual and perceived conflicts of interest. Dismiss them at your own risk. Conflicts of interest remain one of the leading causes of legal malpractice claims in the U.S.

Tips for Avoiding Conflicts of Interest Involving Lateral Hires

The rules vary by jurisdiction, but most state bars follow ABA Model Rule 1.8. More generally, the below can be used as guidelines:

  • Take the Time. The first step is to take it seriously. This starts by having thorough records. You must have the information to conduct a conflicts check to begin with. You'll need a list of clients, whether the case is open or closed, the relationship you had to the parties (i.e. client, adverse, third-party) and a little more besides. There is software available to make the process move more quickly, but if that is not an option you'll still have to check it with Xcel or whatever program you are storing the information on. Does your lateral hire not have good records? If so, that's a red flag in itself.

  • Establish Conflict of Interest Rules for the Firm. Know when your state prohibits you from accepting a client and when you'll need to get the client to sign a waiver. Having a policy beforehand avoids the panic associated with finding a conflict of interest. If you've been a lawyer long enough and your firm is growing, a conflict is going to occur. Be prepared for when it does.
  • Don't Leave Laterals on an Island. Your new hire (or partner) may value independence. And it's not like you have oodles of time for onboarding. Still, make sure that you have all the information you need prior to bringing in anyone new. It is precisely this sort of situation that is ripe for an unforeseen conflict of interest.

The Conflicts Check Is an Essential Part of Growing Your Firm

Conflict of interest checks are like invasive medical screenings. They may be unpleasant, but they are essential to a healthy practice. Take the time to know your state's rules regarding conflicts, and vet lateral hires thoroughly. Failing to do so can lead to a much greater headache and a larger malpractice rate.

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