Approximately 10 percent of all attorney malpractice lawsuits involve claims of conflict of interest. We see them most often in legal matters that involve trusts and estates, as well as business transactions that involve business partners.
The more parties involved in a matter represented by a single attorney, the greater the likelihood that a claim of conflict can be made; especially if a party to the matter feels aggrieved afterward.
In trust and estate matters, we’ve seen situations where multiple family members prefer to work with a single, “family” attorney. If the attorney is familiar with the family, he or she may feel that all parties are on the same page and that the matter can be handled simply. However, especially in situations where emotions might be running high, family members can diverge in their goals and it is possible for one party or another to feel slighted or that another family member’s interests were held above their own. These situations can quickly devolve into conflict of interest claims.
The same is true in certain business transactions – including mergers or divestitures. Small businesses may see a financial advantage in working with a single attorney, especially in the beginning where the parties feel they are in agreement. However, often times as the transaction progresses and disagreements arise, attorneys can find themselves accused of placing the interest of one party above another. This, too, can lead to a conflict of interest claim.
The key to mitigating a conflict of interest claim from the start, and also the most challenging aspect of avoiding such claims, is to recognize a potential conflict from the very beginning. The more complex the matter, the greater the likelihood of a conflict claim. It’s also critical that attorneys hold their client’s interest above their own.
As an example, we once had an attorney who missed a filing deadline for a client. This attorney disclosed the missed deadline and continued to represent the client. When the opposing party presented a low-ball settlement offer, the attorney recommended the client take it. Because the client suspected the recommendation of the settlement was only made due to the missed deadline, the situation resulted in a successful conflict of interest claim against the attorney in question.
And while larger firms may use conflict management software, such tools are only effective based on the information entered into them. In truth, conflict management rests primarily with the attorney and his or her assessment of the risks involved in the legal matter at hand.
Should an attorney find him or herself in a potential conflict of interest situation, there are clear steps to be taken:
- Manage client expectations from the start. Advise of potential conflicts.
- Full disclosure is recommended if a conflict arises.
- Talk with your in-house ethics counsel or report the situation to a partner or peer at your firm.
- Ensure your ability to walk away from a matter if a conflict occurs.
In rare instances, conflicts can arise despite your best intentions. Having a plan in place, such as the above recommendations, to manage those conflicts will best protect your practice as well as your clients.