clients’ views on conflicts

From my interviews with clients it appeared that their view of what amounts to a conflict of interest depends to a large extent on the industry within which they operate. Clients who have businesses in fiercely competitive markets had a sim­ilar stance to the Law Society.

Firms can expect to earn several million pounds a year in fees from us. We would expect, quite rightly, that their behaviour would go above and beyond Law Society rules. Even if, as a strict matter of interpretation, taking an instruction from a com­petitor would not be contrary to the rules, we would not want them to do that.

Client A held a similar view:

Take the example of rival bidders. in that scenario there is bound to be a loser and therefore there is a lot to gain. The other side would clearly like to know how much we’re bidding and vice versa. So, I just think that information really shouldn’t be held within the one firm.

These clients would, at the very least, expect their solicitors to act in accordance with Law Society guidance.

Others^[365] took a more relaxed view. Although all agreed that a conflict would arise if a firm acted for both parties in the same dispute, as in the example of Tom and Jerry, they did not consider it a problem if a firm were to act for two sides who were in competition, but not direct opposition, with each other. Client B gave one example:

We would be surprised to see the firm representing the other side if they’d represented us in a situation which had a direct bearing on the deal. But we wouldn’t be surprised to find them on the other side in the same transaction if we didn’t have any kind of his­tory in that regard. Likewise, if we’d instructed a firm which was also representing another party and we were both competing to be the arranger of a syndication, we wouldn’t be particularly alarmed.

These clients did not regard common-goal conflicts, confidential information conflicts and commercial conflicts as ‘proper’ conflicts. Client D explained why:

These types of situation are not really an issue. It would be unreasonable for us to say that a firm can never act against us because we use more than one firm. Indeed, it can be quite advantageous to use just the one firm, especially where all parties are work­ing towards one goal.

Client E added:

I’m not concerned about firms acting for the other side if I’m not instructing them on that matter.

In the remainder of this chapter I shall analyse the procedures adopted by firms when faced with a conflict or potential conflict. In particular, I shall consider what criteria firms employ in reaching a decision. The first question to be asked is: who within the firm makes the final decision on whether instructions from a particular client should be accepted?

THE DECISION-MAKER

The choice of decision-maker within a firm might be considered by some to be the most important aspect of managing conflicts.^[366] As the position may involve an evaluation of underlying relationships with both clients and colleagues, it may be difficult for a fee-earner directly involved with the case to remain impar­tial. The temptation presented by a prestigious or profitable piece of work may result in a potential conflict not being addressed.^[367] Moreover, should the fee­earner concerned hold a relatively junior position within the firm, he could find it more difficult to resist the pressure brought to bear by senior colleagues. A study of large firms of corporate lawyers on the East Coast of the United States highlighted some of these difficulties.^[368] By posing a hypothetical situation to fee­earners and asking who within the office they would expect to handle the mat­ter, certain patterns of behaviour were identified—namely, that there were stronger and weaker fee-earners in most firms.

The Law Society lays down no guidelines as to who within the firm should be the decision-maker. One option, as we have seen, is to take the decision out of the hands of the lawyers directly involved in the case. This, however, can be expensive. It may also be impractical as independent assessors require a degree of knowledge of the case. Yet the benefits of impartiality may outweigh the additional expense and inconvenience in the long run. One firm commented:

We ensure that any decision is taken by independent partners. If a fee-earner closely connected with the client makes the decision, it can have implications for us all. After all, each and every partner is equally liable for any decision taken. Therefore, if the solicitors involved with the case are prepared to take a risk in order for both of them to retain their respective clients, they are putting the whole partnership in danger of being caught out.^[369]

Firms which adopted this approach were in the minority. Of the firms which participated in the research, only three said they ensured that any issue relating to a conflict of interest was independently decided. Firms 14 and 22 said they referred any conflict or potential conflict to ‘an ethics committee chaired by a senior partner with at least two other partners not involved with the relevant client’. Firms 9 and 30 had conflict officers in each of their offices with whom any conflict was to be discussed. The ultimate decision rested with individual officers, but where there was doubt, the officer was meant to refer to a colleague in a different office. Even this system appeared not to remove peer pressure from those officers:

I will often be of the opinion that we really should not act on a particular matter but one or sometimes both of the partners involved will come and say, ‘Why can’t we act? We’re both happy, the clients are happy and there shouldn’t really be a problem.’ You are then put in a very difficult position and I must admit that I have sometimes capit­ulated and allowed the firm to act.^[370]

The remaining firms adopted a more informal approach.

Initially the decision is left entirely to the fee-earner concerned. If he is unsure, he will refer the matter to his supervisor. If a decision still cannot be reached, the matter is then referred to the departmental manager.

Some firms left the ultimate decision to the senior or managing partner:

We leave the decision to the partner in charge of the department. If partners cannot agree between themselves, then the senior partner will arbitrate.^[372]

It would appear from the above that most firms deal with conflicts on an ad-hoc basis. Typically, no guidelines are provided as to when a matter should be referred to a senior colleague. The dangers of such an approach are self-evident. Whilst the fee-earner who does not refer a matter might find himself in some difficulty should a complaint be made at a later date, he may nonetheless be tempted to take the risk. Nor do such concerns appear to be confined to the more junior members of the firm. The use of the word ‘arbitrate’ in the above comment gives some clue as to the problems which may arise in allowing part­ners directly involved with clients to have a say in the matter. ‘Arbitrate’ sug­gests that neither partner may be prepared voluntarily to relinquish his client. This raises a question concerning the basis for their decision where other part­ners have not been involved and they have decided the issue themselves.^[373]

A system of informal consultation can create further problems, as no measures may be in place to protect confidentiality during the consultation. If, for example, fee-earner A is in some doubt as to whether he should act, he may refer the matter to senior fee-earner B.

The fact that questions have been raised about the decision-making process does not necessarily mean that firms are unable to protect the various interests involved. Provided the criteria used in reaching a decision are objectively based and universally applied, it may not matter who within the firm is charged with the responsibility of deciding conflicts.