General Practice, Solo & Small Firm DivisionMagazine
Volume 17, Number 4
CONFLICT MANAGEMENT USING TECHNOLOGY TO NAVIGATE THE MINEFIELD
BY J. Anthony Vittal
When I was approached to write this article, I first thought it would be a snap. On further consideration, however, I realized that any discussion of the subject requires an appreciation of the reasons for-and the limitations of-using technology to help navigate the conflicts minefield.
Technology is nothing more than a tool to help the user achieve a desired goal. It will not achieve the goal on its own and, like all tools, it can be dangerous. Effective use of the technology tool requires training, experience, a knowledge of the tool's limitations, and-perhaps most important of all-use of other traditional techniques with the tool in an integrated approach to the problem.
Loyalty to clients is one of the core values of the legal profession. This requires avoidance of conflicts of interest, both real and potential. Avoidance of conflicts facilitates yet another core value, the preservation of confidentiality, according to Comment 4 to Model Rule of Professional Conduct 1.6 ("A fundamental principle in the client-lawyer relationship is that the lawyer maintain confidentiality of information relating to the representation"); and the California Business & Professions Code § 6068(e) ("It is the duty of an attorney. . . . to maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client")).1 Conflicts avoidance and preservation of confidentiality have been major components of the ongoing national debate about multidisciplinary practice. Closer to home, violations of these core values can result in motions to disqualify us, if not bar disciplinary proceedings and malpractice claims.
There are two types of conflicts-absolute and waivable. Some conflicts can be waived if the client or prospective client gives its informed written consent, i.e., the client's agreement "to a proposed course of conduct after the lawyer has communicated reasonably adequate information and explanation regarding the material risks of and reasonably available alternatives to the proposed course of conduct" (Proposed Model Rule 1.4(c)). All conflicts management schemes therefore must be designed to reveal, before the engagement starts, all then-existing actual and potential conflicts.2 As the Model Rules note, "a lawyer must adopt reasonable procedures, appropriate for the size and type of firm and practice, to determine in both litigation and non-litigation matters the persons and issues involved and to determine whether there are conflicts of interest" (Proposed Model Rule 1.7, Comment 2). The appropriateness of procedures for a lawyer who always has been engaged in solo practice therefore will differ materially from those for a firm comprised of peripatetic lawyers who each may have practiced in any number of other firms before joining the current firm.
Another consideration should be those matters that, although not rising to the level of a cognizable conflict of interest, may invoke feelings in the client that the lawyer has divided loyalties.3 In those circumstances, the resulting damage to the lawyer-client relationship may impair the client's faith in the lawyer's performance and lead to constant second-guessing. Identification of those circumstances will guide you in determining whether to disclose them to the prospective client at the onset of the engagement or as they arise. As a general rule, these matters always should be disclosed as soon as they are identified. By doing so, you will reinforce your client's trust and confidence in you and your firm.General Conflicts Rule
For conflicts-screening purposes, a conflict of interest exists if the representation of one client will be directly adverse to another client (Proposed Model Rule 1.7(a)(1); California Rule of Professional Conduct 3-310(C)).4 This includes the following situations:
- Acting as counsel in one matter against a person the lawyer represents in some other matter, even if the matters are wholly unrelated.
- Acting as counsel in one matter, and then accepting a new client in another matter who also has an interest in the first matter that is adverse to the client in the first matter.
- Simultaneous representation of clients whose interests are economically adverse, such as representation of one client against an affiliate (parent, subsidiary, or commonly controlled enterprise) of another client.
- Cross-examining a client who appears as a witness in a lawsuit against another client (Proposed Model Rule 1.7, Comment 4; see also California Rule 3-310(B)(1)).
A conflict of interest also exists if there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's duties to another client or to a former client, or by the lawyer's own interests or duties to a third person (Proposed Model Rule 1.7(a)(2)). This includes, among others, the following situations:
- Simultaneous representation in related matters of clients whose interests are economically adverse, such as representation of competing economic enterprises in litigation in which there is inconsistency in the positions being advocated.5
- Referring the client to, or using the services of, an enterprise in which the lawyer or firm has an undisclosed financial interest.6
- Situations in which the client wants to sue an enterprise in which the lawyer, or another lawyer in the firm, or even the firm itself owns an interest.
- Situations in which the lawyer's duties of loyalty and independence may be materially limited, or in which the lawyer's duties to preserve confidentiality may be compromised, by fiduciary duties to others arising from the lawyer's service as an executor, a trustee, or a corporate director7 (including service as a director of the corporate client).
Specific Conflicts Situations
In addition to the general conflicts rules, these specific rules apply:
- A lawyer shall not use information relating to representation of a client to the disadvantage of the client (Model Rule 1.8(b) [allowing for certain exceptions]).
- A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent to the representation (Proposed Model Rule 1.9(a)).
- A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client (1) whose interests are materially adverse to that person; and (2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter; unless the former client gives informed consent to the representation (Proposed Model Rule 1.9(b); see also Proposed Model Rule 1.9(c); compare California Rule 3-310(E) (absent informed written consent, a lawyer shall not "accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the [lawyer] has obtained confidential information material to the employment")).8
- A lawyer shall not have sexual relations with a client unless a consensual sexual relationship existed between them when the lawyer-client relationship commenced (Proposed Model Rule 1.8(k); cf. California Rule 3-120 (which potentially extends the prohibition to lawyers in the firm other than the lawyer(s) participating in the representation)).
- Without the informed written consent of each affected client, a lawyer related to another lawyer as parent, child, sibling, or spouse, or by a cohabitating relationship closely approximating marriage, shall not represent a client in a representation directly adverse to a person whom the lawyer knows is represented in the same or in a substantially related matter by the other lawyer (Proposed Model Rule 1.8(i); compare California Rule 3-320 ("A member [of the State Bar] shall not represent a client in a matter in which another party's lawyer is a spouse, parent, child, or sibling of the member, lives with the member, is a client of the member, or has an intimate personal relationship with the member, unless the member informs the client in writing of the relationship)).
- An attorney has an obligation to disclose to his or her client a close personal relationship with a court reporter or bailiff (California State Bar Formal Opinion 1987-93). This is animated by concerns that the relationship might inhibit the attorney from challenging a transcript or the bailiff' s conduct with the jury.
These prohibitions are extended to law firms if they would apply to any lawyer associated with the firm (Proposed Model Rule 1.10(a)). Thus, the law firm has a compelling interest in developing the information necessary to assure that it, as well as the lawyers in the firm, do not violate the rules.Information to Be Developed by a Conflicts-Checking System
These rules provide guidance for the development of any conflicts-checking system. Clearly, any such system requires thoughtfully designed forms for client intake and for personal attorney data, as well as a system for developing the necessary database information for lawyers joining the firm.
Client intake form. The client intake form must elicit the following information about the client and the client's matter:
- The name and address of the client, and for entities the nature of the entity and state in which it was formed, together with the name and contact information of the principal client representative if applicable.
- If the charges for the engagement are to be paid by a third party (someone other than the client), the name and address of the payor, together with the name and contact information of the principal payor representative if applicable.
- A detailed description of the nature and scope of the engagement.
- If the client is an entity, the identity of all persons affiliated with the client, including parents, subsidiaries, affiliates, partners, members of the governing board (e.g., board of directors of a corporation or management committee of an LLC), and significant shareholders.
- If the client is an individual, the identity of all persons related to the client by blood or marriage who have used the services of the firm or are potential clients of the firm.
- The case name and docket number of, and a description of all parties and issues involved in, any litigation in which the client, and any affiliate or family member of the client, is involved. This section of the form also should provide for identification of the judge to which the case is assigned (if a direct calendar matter) or the judges who are likely to hear the case (if a master calendar matter).
- The identity of all potential witnesses in the matter, including the identity of the employer of each such witness.
- If the client is a business enterprise (sole proprietorship or otherwise), the identity of the market segment in which the business operates and a description of the specific business in which the enterprise is engaged.
- For individuals, a description of the nature of any personal relationship between the client and any lawyer in the firm. For entities, a description of the nature of any personal relationship between the person in charge of the engagement for the client and any lawyer in the firm.
Historical dataset. If some or all of this data is missing from your database for current and previous engagements of your firm, you will need to develop the information for inclusion in your conflicts-checking database. Without it, you will be unable to screen for conflicts involving prior clients of your firm.
For every person who has moved or is moving to your firm from another firm, you also will need to develop as much of the same information as possible for engagements handled by each firm or agency with which the person has been associated.9 Acquisition of this information can be particularly difficult, as many firms refuse to release this information. Indeed, some firms will go so far as to sue to enjoin any use of their client/matter lists by personnel leaving the firm. If a complete dataset has not been brought to your firm by the person joining your firm, you should make every effort to have that person recreate the dataset from information in his or her personal files, personal information manager, and memory.
Attorney data form. The attorney data form must elicit the following information about every lawyer in the firm and must be updated at regular intervals, as well as every time the information changes:
- Every entity in which the lawyer, or a member of the lawyer's immediate family, owns an interest.
- If the lawyer is an officer or director of any corporation other than the law firm, the identity of that corporation.
- If the lawyer is the executor of an estate, the name of the decedent, the name(s) of the beneficiaries, the name of the court in which any probate proceeding is pending, and the docket number of that proceeding.
- If the lawyer is a trustee of any trust, the identity of the settlor(s) and beneficiaries of the trust.
- If the lawyer is a trustee of any nonprofit corporation or foundation, the identity of the entity, the identity of all other trustees, and the identity of the employer of each other trustee.
- If any (1) parent, child, sibling, or spouse of the lawyer; or (2) person in a cohabitating relationship closely approximating marriage to the lawyer; or (3) person who has an intimate personal relationship with the lawyer; or (4) client of the lawyer also is a lawyer, the identity of the firm in which that "related" lawyer practices.
- If the lawyer has a close personal relationship with a court reporter or bailiff, the identity of that person and the judge to whose courtroom the person is assigned.
Creation of Database Management System
This information, once collected, must be incorporated into a searchable database, preferably one using an SQL (structured query language) application to access the data. The creation of this database must be handled with exquisite care to avoid your becoming a victim of GIGO.10 Unfortunately, there is no turnkey application currently on the market that will effortlessly enable you to fully automate your conflicts-screening system. Existing conflicts-screening applications typically are relatively primitive modules appended to a time-and-billing or case management system, none of which permits the inclusion of all relevant data.11 This means you will have to create one from scratch if you want effective automation.12
Ideally, your SQL application should be able to access and search not only the conflicts- screening database you will be creating, but also every PIM (personal information manager) on every desktop or other computer on your network.13 After all, to be thorough, you want to be overinclusive when checking names against available data. If your office is not yet networked, you should consider doing so now to facilitate automation of your conflicts-screening system.
If you want to get really sophisticated, and if money is no object, you can acquire an Oracle, Sybase, or Microsoft enterprise database server. These systems, however, are expensive and require a substantial level of expertise to implement your database management system (DBMS). Moreover, the Oracle and Sybase systems typically are Unix or Linux platforms, which can be problematic if you are operating in a Windows environment. However, if you have a high-volume practice and/or if your stand-alone DBMS outgrows the capacity of its computer to effectively handle it, you may be forced to invest in an enterprise database server.
The good news is that there are numerous Windows-based SQL stand-alone applications on the market.14 For example, and without limitation:
Oracle8i™ Personal Edition for Windows98 and WindowsNT-arguably the most powerful desktop DBMS on the market today. It is a full-featured version of Oracle8i, fully compatible with the entire Oracle8i database family, allowing seamless transition to an Oracle enterprise server. It is virtually in a class by itself, but requires a high level of sophistication to use.
Lotus Approach® Millennium Edition 9.5-a component of the Lotus Smart Suite, as well as a stand-alone application. Approach is a powerful award-winning relational database management system running in Windows. It offers breakthrough ease of use, excellent cross-product integration, connectivity, and outstanding power and analysis capabilities. Approach lets users seamlessly connect to all data, whether it is stored in dBase, DB2, Oracle, Lotus Notes, or almost anywhere else. You can use simple or SQL queries. Its data files are written as dBase tables (*.dbf). Forms for data input and for reports are fully and infinitely customizable. Approach's reporting features deserve special attention because they enable users to edit reports in WYSIWYG mode: You can see your actual data presented in rows for you to format and arrange on the page. (By comparison, databases like Microsoft Access® allow report design only by using field placeholders, which is less intuitive.)
For future flexibility, the software includes drivers to connect to all the major server databases such as IBM DB2, Microsoft SQL Server, Oracle, and Sybase. Connecting is just a matter of selecting the right database type and filling in the prompts to specify which database server to access. Approach 9.5 is great at letting users easily customize data. Data is saved upon entry, which protects you against data loss if your system crashes or you encounter The Blue Screen of Death. Approach 9.5 still maintains its ease of use for beginners, and its macro language is far easier to learn than VBA. Lotus Development Corporation, which also publishes the most powerful and most efficient spreadsheet application for Windows-based platforms (Lotus 1-2-3®), is a member of the IBM family of companies.
Corel Paradox®-a component of the Corel WordPerfect Suite, as well as a stand-alone application. Originally developed by Borland, Paradox also is a powerful relational database management system running in Windows. You can use simple or SQL queries. Paradox can access any file written in or convertible to dBase (*.db). With the recent merger of Corel and Borland, further development and support of the application is assured.
OsloData (www.interlog.com/~molson/ oslodata.htm) is another relational DBMS operating on Windows platforms. Its developers claim that it is a useful tool for all database users, including developers and administrators, and that it can be used to open, index, query, design, and convert databases of all popular formats. You can design your own stand-alone data-access applications with no knowledge of programming needed. OsloData, like Approach and Paradox, can help you create easy-to-use data forms to enter and modify your data. A simple scripting language is included for versatile access to controls, variables, SQL expressions, and the like.
Ocelot (http://ourworld.compuserve. com/homepages/ OCELOTSQL) makes the Ocelot SQL DBMS-which its developers incredibly claim to be the only DBMS that supports the full ANSI/ISO SQL Standard (1992)-and an always-growing checklist of SQL3 features (also known as SQL-99). Ocelot supplies DLLs for Microsoft Windows®95/98 or NT. Users can call database libraries from programs written in C or Pascal (Delphi). Ocelot also provides an online source for documentation that explains and provides examples of the full SQL-92 standard. For end users there is a GUI (Windows-like) front end. There are no index files (a disadvantage that increases search processing time) and no nonstandard extensions to the language. Basic instructions are downloadable; a printed book with full SQL documentation is available from your local bookstore. Any book on standard SQL will serve as extra documentation.
Finally, for those of you who are faithful buyers of Microsoft products, there is Microsoft Access®-the Microsoft Office DBMS, as well as a stand-alone application. It has built-in Microsoft SQL Server™ integration, allowing you to create a SQL Server database from within Access.Effective Use of SQL Reports
- Once you have the system designed and implemented, including the SQL scripts to search for the information needed to generate conflicts-screening reports, you may be only part of the way toward your goal. If a report shows any potential conflicts, you still will need to contact the lawyer(s) who handled or are handling the conflicting engagement(s) or who have the conflicting relationships to ascertain the nature and scope of the conflict(s).
- To protect yourself against the unintended consequences of utter reliance on your technology tool, you also will need to poll all firm personnel by circulating a Prospective New Matter Report, setting forth the relevant conflicts-checking information. Experience teaches us that staff memories often reveal conflicts information that even the most sophisticated conflicts-checking software will not unearth and that we lawyers have long since forgotten.
With a properly designed and implemented firm-wide relational DBMS as your automated conflicts-checking system, combined with a scheme that mines the memories and records of all firm personnel, you should be able to identify all potential conflicts of interest not immediately apparent from the nature or terms of the proposed engagement. If you do so, you should be able to safely negotiate the conflicts minefield, while demonstrating to your clients at the inception of their engagements that you are committed to the core values of our profession.Notes
- The Ethics 2000 Commission has proposed substantial revisions to the ABA Model Rules. This article is based on the drafts of March 23, 1999, which are referred to in this article as "Proposed Model Rule." You can review the proposed amendments on the ABA Center for Professional Responsibility's website, www.abanet.org/cpr/ethics2k.html. You can review the current version of the California Rules of Professional Conduct at www.calbar.org/pub250/1995rpc.htm.
- This is not intended to imply that your conflicts management scheme need not identify client-created conflicts that materialize in the course of your engagement. If you or your firm is not intimately involved in the affairs of your client, those conflicts will be revealed only by constant diligence, including periodic contacts with your client to ask, "What's new?"
- For example, the Ninth Circuit has just decided that a firm has no duty to inform its client, its client's lead counsel, the opposing party, or the judge before whom the case is pending, that the judge's law clerk had accepted an offer of future employment with the firm (First Interstate Bank of Arizona, N.A. v. Murphy, Weir & Butler, ___ F.3d ___, 2000 C.D.O.S. 3012 (9th Cir., Nos. 98-17420 & 99-15410, April 20, 2000).
- This article does not address obvious consentable conflict situations, such as (1) the representation of multiple clients in a single engagement; (2) entering into a business transaction with, or knowingly acquiring an interest adverse to, a client; (3) accepting payment for the engagement from a third party; or (4) a conflict arising from a mid-engagement merger or acquisition involving the client. Because these conflicts are patent, a conflicts screen is not required to reveal them. Nonetheless, your client intake form should have a field to identify representation of multiple parties in the same engagement, another to identify third-party payment situations, and a set of boxes for each to be checked to indicate whether a waiver is required because of potential conflicts.
- By comparison, California does not regulate positional conflicts. Even so, disclosure to the client always is wise.
- Although a waivable conflict, if it is not waived, some courts view conduct such as this as an act of moral turpitude, as egregious as taking kickbacks.
- Where a firm was engaged to represent an individual and his or her controlled entity in securing loans for, and subsequently purchasing stock in, another corporation, and a lawyer in the firm was a director of and represented both corporations, the failure to disclose potential conflicts of interest and to seek and obtain the informed written consent of the new clients resulted in a recently filed $4 million conflict of interest suit against the lawyer and the firm. (Denise Levin, Noted Firm Faces $4M Conflict of Interest Suit, L.A. DAILY J., Mar. 28, 2000, at 2).
- California courts make the determination under California Rule 3-310(E) pursuant to the "substantial relationship" test, which results in a progression of reasoning similar to that under the Model Rules.
- This principle applies not only to lawyers but also to support personnel. Paralegals, legal secretaries, records clerks, docket clerks, and other support personnel often have as much access to confidential client information as the lawyers with whom they work.
- GIGO is the acronym for "garbage in, garbage out"-the inevitable consequence of deficiencies in the data or in the search query.
- If you are using an online time/expense and billing system such as Elite's Timesolv™ (www.elite.com), Red Gorilla (www.redgorilla.com), OpenAir's TimeBills (www.openair.com), or Freeworks (www.freeworks.com), rather than a dedicated in-house system, the problem is even greater. None of them includes any conflicts-screening module.
- Some SQL-based billing and accounting systems that include a conflict-of-interest module, such as Barrister's Javelan, could be elaborated upon to provide the level of sophistication the basic system lacks. This will require significant programming expertise, as well as a substantial investment of time and money.
But then there is JurisDictionUSA (www.jdusa.net), the first full-service application service provider for the legal profession. Its unique secure (encrypted) online law office suite and law library includes document management, case management, integrated docket and calendaring, time entry, and billing, and will include conflicts of interest checking. If the conflicts checking module currently under development meets even most of the goals described in this article, it will be a useful tool enabling users to avoid the need to create their own.
- To do so automatically, however, you likely will need to implement an enterprise database server, such as those described below, as stand-alone systems typically are unable to access or convert the data used by PIMs, case management, and time-and-billing applications.
- The author has not evaluated any of the software listed in this article. The information is provided solely for your convenient reference. You should consult with your in-house or outside information technology resources to determine what software is best suited for your particular circumstances.
J. Anthony Vittal is managing partner of Vittal and Sternberg, a business litigation boutique in Los Angeles, California. He is a member of the House of Delegates, representing the State Bar of California, and chairs the Technology Subcommittee of the House Committee on Technology and Communications. The author is grateful to Diane L. Karpman of Los Angeles for her assistance in the preparation of this article.