Risk management has become an area of intense interest for law firms, and one particular aspect — conflict management — has become a major point of concern for some members of the legal industry.
Legal Executive Institute sat down with James Jones, Senior Fellow at the Center for the Study of the Legal Profession at Georgetown University Law Center, to discuss how conflict management is impacting law firms’ relationships with their clients.
Legal Executive Institute: Why has conflict management become such an issue within the legal industry?
James Jones: In part, it’s because of the action of clients. It used to be that as a lawyer, you only had to worry about what the ethical rules said and what was in your engagement agreement. Now many corporate clients are using outside counsel guidelines (or OCGs) to impose conflict rules that are vastly more comprehensive than anything required under the established ethics rules.
And some of the new requirements are just horrendous; for example, having a lawyer promise that he or she will never represent a client that is in a “positional” conflict. That means you can’t be arguing a position on behalf of another client that your first client finds uncomfortable. And, by the way, the first client may well say that this positional conflict restriction extends not only to the company the lawyer represents, but also to that company’s whole family of corporate entities — parent company, subsidiary companies, sister companies — whether those companies exist now or may exist in the future. In my view, it’s probably unethical for a lawyer to sign a provision that broad. And yet, there it is.
Legal Executive Institute: Sound like quite an entanglement, how are law firms keeping track of what their lawyers are agreeing to?
James Jones: That’s a huge issue, too. A law firm will have an intake process, and a partner will sign an engagement agreement with the client, and put that in the file, thinking okay, that governs our relationship. Six months later, the client’s general counsel will send their outside counsel guidelines to the partner, saying: “Oh by the way, these apply to our relationship, too. And if you bill us and accept payment, henceforth you will be deemed to have approved all of these additional requirements.”
The partner in charge may not even read those guidelines, or may stick them in a file somewhere. Now, the law firm’s general counsel doesn’t even know they exist. And these OCGs may impose significant restrictions on what the law firm can and can’t do in the future. This creates a terrible problem for law firm general counsel.
Legal Executive Institute: Some of this sounds quite alarming. How can these issues be resolved?
James Jones: It’s going to come to a loggerhead because I don’t see much current willingness on the part of clients to pull back on those kinds of requirements. If you look at where OCGs seem to be headed, what they are doing is imposing a new form of restriction on the right of lawyers to practice and, incidentally, reducing the ability of other clients to be represented by counsel of their choice. I believe that should be considered unethical.
There’s a possibility that you will see an organized response, perhaps from the American Bar Association (ABA); but what needs to happen is a real dialogue between outside law firms and in-house general counsel. I have a sense that over the last decade, the nature of the relationship has been increasingly strained and increasingly adversarial.
And that’s not good for either side. It is also not good for our profession or the legal system. We need to find a way to start a meaningful dialogue, because right now, at least on this issue, it’s not going in a good direction.