Ethics compliance and risk management in law firms and in-house legal departments start with issue spotting. Some issues—like “Who is the client?”—are fundamental to complying with legal ethics rules. Other such questions include:
- “What does the engagement letter say?”
- “What is the scope of work?”
- “Are there outside counsel guidelines?”
- “Have you conducted client due diligence?”
- “What are the client’s expectations with respect to protecting the confidentiality of their information?”
- “Have we updated our business continuity plan?”
This article and the accompanying program will tackle these issues and more.
To analyze an ethical conflict of interest situation, one must answer the age-old question: who is the client? An attorney-client relationship does not depend upon the existence of a signed engagement letter, nor is the identity of the client necessarily determined by who pays the lawyer; rather, one test for the existence of an attorney-client relationship is the subjective reasonable belief of the would-be client that the lawyer represents the client. Stated somewhat differently: if a person seeks legal advice from a lawyer; that person shares, in confidence, information about the matter; and the lawyer does not disavow an attorney-client relationship, it is likely that an attorney-client relationship has been formed.
Many lawyers give little thought to an engagement letter. The engagement letter is the contract between the lawyer and the client for services the lawyer is being engaged to provide. It identifies the parties to the contract, the scope of the services the lawyer will provide, and how much (or at what rate) the client will pay the lawyer for those services. Engagement letters may also contain other important terms, such as an “advance waiver” provision that allows the lawyer to be adverse to the client on unrelated matters. Clients, too, may have their own Outside Counsel Guidelines that establish terms and conditions for the representation, including the client’s expectation (and the lawyer’s corresponding agreement) as to what other entities are to be considered the client for conflict of interest purposes.
Due diligence on the potential client is also important. Not only can such due diligence identify the “bad actor” client or the “difficult client,” it can also identify the “slow pay” client or “no pay” client, (i.e., one for whom a retainer may be useful to help ensure that the lawyer is compensated for the services rendered).