Former Client Conflicts and Ethical Screens for Lateral Hires
This article is by Kristopher Klein, J.D. of InOutsource. For more author information, please see below.
Conflicts of interest surrounding the "lateral" movement of attorneys from one firm to another have proven to be a risk management challenge for many firms today. One of the more uncertain aspects relates to conflicts created by laterals' former clients that do not come to the hiring firm. For example, Attorney was formerly with Firm A, where she did work for Company A, drafting and negotiating a supply contract with Company B. Attorney then takes a job with Firm B, which is representing Company C adverse to Company A in a contract dispute over a similar contract. Despite the fact that Company A is the lateral's former client and will not come to Firm B with Attorney, Attorney may have information the firm could use to the detriment of this former client.
To prevent restrictions on practice, while at the same time reducing clients' limitations on choice of lawyer, states have adopted rules providing mechanisms to prevent imputation of conflicts brought about by laterals' former clients. Although these rules vary among jurisdictions, they typically allow firms to construct so called ethical screens to prevent imputation under limited circumstances. This past February, in a long awaited, while at the same time highly debated shift, the ABA's governing body modified Rule 1.10 of the Model Rules of Professional Conduct, to allow screening to prevent imputation of conflicts brought about by laterals' former client relationships. While not authoritative in itself, this ABA rule change has the potential to influence remaining states to adopt similar provisions.
Despite the increasing acceptance and use of lateral screening, firms continue to struggle with the corresponding records and conflicts checking best practices. As screening becomes more widespread, and the trend of hiring experienced lateral attorneys continues, firms should have adequate systems to ensure compliance with jurisdictional professional responsibility standards. The importance of playing by the book can be emphasized using the ABA Model Rule as an example. The model rule requires the affected former client to be given notice of the circumstances, including a description of the procedures employed, to ensure compliance when screening is used to prevent imputation. If your state's ethics rules similarly require disclosure of the conflict and your means of addressing it to the former client, you had better be sure the conflict was identified in a timely manner and the screen was set up expeditiously and effectively.
Although the specific procedures firms use to identify former client conflicts for laterals differ, there are several considerations applicable across the board. Keep in mind the focus here is on conflicts brought about by laterals' former clients: the general discussion of conflicts checks for laterals will be saved for another time.
When a list of former clients is provided by a lateral attorney, the hiring firm will be looking for instances where the firm is representing a client adverse to a former client of the lateral. It is under such circumstances where knowledge the lateral attorney gained during the prior representation can potentially be used to disadvantage the former client. Although jurisdictions that allow screening differ, most set some bar to help decide whether the prior work warrants a screen. For example, the gauge may be set at whether the lateral likely has information material to the new matter, or whether the matters are substantially related. In order to effectively identify conflicts of this nature, not only should a full list of former clients be provided, but it will also be helpful to have a description of the nature and extent of the representations. The level of detail must be sufficient to adequately vet conflicts, while at the same time comply with applicable client confidentiality standards. Although a careful balancing act, some information will be necessary to ferret out former client conflicts.
In addition to knowing what to look for, it is important to consider when the searches and analysis should be conducted. When a firm is considering hiring an attorney, the primary emphasis will almost certainly be placed on identifying conflicts relating to clients the lateral is likely to bring to the hiring firm and parties actively adverse to those clients. These searches will typically be carried out early in the recruitment process. However, even in states with screening provisions, it is important to conduct conflict searches on former clients sooner rather than later. The reasoning, as you may guess, comes down to timing. Courts have emphasized the need for a screen to be set up in a timely manner to ensure attorneys adverse to the lateral's former client are not infected with protected client information. Some have even suggested the screen should be in place at, or before, the time the lateral begins working at the hiring firm. That being said, best practice is to have searches on all parties, including former clients, completed far enough in advance of a lateral's start date to provide sufficient time for any needed follow up and time to set up a screen if necessary.
Say your firm has implemented a procedure to run conflicts on laterals' current clients and adverse parties, and former clients, before the lateral arrives. The question remains: will the firm identify a conflict with the lateral's former client a day after the lateral joins the firm? What about a month later? It is important to remember that the potential for these conflicts to develop does not cease when the lateral walks in the door.
Firms need systems to ensure conflicts continue to be identified after a lateral's arrival. Software is available that will allow a firm to input former clients of laterals and automatically receive notice when a matter is opened in which one of these former clients is listed as an adverse party. However, a well thought out records system can be extremely useful as well. Inclusion of laterals' former clients and potentially a brief description of the nature of the prior representation can help to ensure potential conflicts with laterals' former clients continue to be identified before new matters are opened. Such systems can also be used to facilitate identification of these conflicts by a firm that is not currently looking to upgrade, or purchase new software.
There are various ways to include this information in your conflicts database, but keep in mind that the person conducting the conflicts searches should be able to easily determine that the entity is the former client of a lateral attorney. Additionally, the person analyzing the conflict report should be able to recognize that this is a lateral's former client based on information contained in the report and have a means to collect additional information to determine whether a former client conflict exists. The lateral may need to be contacted to provide the level of detail required to make this determination, so the person analyzing the conflict report should be able to easily identify the relevant attorney. This can be accomplished in a number of ways. For example, if your firm has adopted a matter centric records system, you might consider establishing a client number for laterals, with each lateral occupying a separate matter, and the lateral's former client information contained under that matter.
At this point, the concern may arise that there is already too much information in the conflicts database, both encumbering the process of searching for conflicts and leading to more lengthy conflict reports. The amount of information in conflicts databases is constantly increasing. Some of this information is important and some of it possibly less so. So why include even more? It comes down to whether it is worth the risk to leave out information that can facilitate identification of potentially disqualifying conflicts and ensure compliance with professional responsibility standards. Rather than skimping in the area of laterals' clients, this provides the perfect opportunity to conduct an audit of the information already in the database. Taking a careful look at the information in the database may lead to realizations and changes that can increase overall efficiency and decrease wasted time. In the end, you may be surprised that conflicts checks are conducted more efficiently, despite the inclusion of the additional information.
It is important to ensure you have procedures in place to search former clients of laterals early in the recruitment process and for adequate information to be gathered to apply the facts to applicable professional responsibility standards. If your jurisdiction allows screening, make sure your system ensures screens are set up in a timely manner and in a way that will adequately protect information. Additionally, make sure you will continue to identify potential conflicts that arise after a lateral joins the firm. A carefully thought out system can accomplish these goals and even give you the opportunity to increase the efficiency of your conflicts process.
About the Author
Kristopher Klein is a conflicts analyst at InOutsource, a leading provider of records retention and information management consulting to law firms. He works with clients to research, review, analyze and resolve potential conflicts of interest. He also helps clients establish workflow processes for handling and resolving conflicts and trains staff on these processes and procedures. Kristopher holds a Bachelor of Science degree from Lafayette College in Pennsylvania, and a Juris Doctor, cum laude, from Georgia State University College of Law. Mr. Klein can be reached at firstname.lastname@example.org.
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