October 18, 2011 Articles

Contract Freedom, Advance Conflict Waivers: Fair Play for Consenting Adults

The following is a dramatization in three acts of a situation that, in words or substance, regularly occurs in the United States.

By Steven C. Krane

The following is a dramatization in three acts of a situation that, in words or substance, regularly occurs in the United States. The resemblance to any particular set of facts, or to any particular individuals, living, dead, or as yet unborn, is purely coincidental.


Act I
CLARA:   Hello, Leo. I finally have a problem that I hope you can help me with.
LEO:    Good to hear from you, Clara. I’m sure that if I can’t help you, one of the other 999 lawyers in my firm can.
CLARA:   That’s great. My company has a little matter pending in Smallville for one of our subsidiaries, and while I think it will go away quickly, I want to make sure it is handled properly. Our regular outside counsel will take the lead, but I know your firm has a Smallville office, and I would like you to be local counsel.
LEO:    Local counsel, huh? Well, we don’t usually take on that sort of engagement.
CLARA:   Why not?
LEO:    Well, because of conflict concerns.
CLARA:   Conflict concerns?
LEO:    Sure, Clara. You can understand the situation. Your company is a diversified business with a few hundred subsidiaries and several different lines of business. We have thousands of other clients who may want us to represent them across the table from, or even in litigation against, some particular piece of your enterprise. We may already be adverse to you, or even represent one of your company’s subsidiaries somewhere, but I’m running a conflict check as we speak to be sure.

 CLARA:   I don’t see why any of that should be a problem, Leo. You’re a big firm with a thousand lawyers and offices around the world. I wouldn’t have a problem with you being adverse to us as long as what you’re doing for another client isn’t affecting your work for us.
LEO:    Well, in that case, I’d like to get assurance from you that if we take on this little matter in Smallville for your sub, it won’t preclude us from being adverse to you in the future.
CLARA:   That’s understandable. We have lots of law firms; you have lots of clients. We’re not looking to block you from ever being on the other side of a matter. But there would have to be some limits.
LEO:    Like what?
CLARA:   Well, this may not be a big case for you, but we still wouldn’t want you to be adverse to us in anything related to this matter.
LEO:    That seems fair. What the ethics opinions suggest in this situation is that we agree to limit the scope of our representation to the particular subsidiary in question so that we don’t even have an issue about a conflict if what some other client wants us to undertake is adverse to some other piece of your company.
CLARA:   Well, we would consider your representation of the sub to really relate to the company’s whole Acme group of businesses. All the businesses in the Acme group are really interrelated.
LEO :   OK. Send me a list of the subs in the Acme group so we can be sure to have them in our conflict checking database.
CLARA:   What else?
LEO:    Well, even as to those subs in the Acme group, we would want to be able to take on adverse representations that aren’t substantially related to the little matter in Smallville, like you said.
CLARA:   I can understand that, too. We really want you guys to handle this for us. So, we’re willing to agree to those ground rules. Why don’t you draft an engagement letter for us to review. I’d like to have it reviewed by our regular outside counsel, you know, the firm you will be working with in this little matter.
LEO:    Sure. I want you to be completely comfortable with this understanding. We want to avoid technical conflict issues that don’t really have any material effect on our representation of your company
CLARA:   I’m sure it will be fine, Leo. Thank you for taking this on.
LEO:    Our pleasure, Clara.

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