Risks have always been a part of a law firm’s business.  Clients rely on an attorney’s expertise in complex matters the client has no power in.  When those clients feel wronged, or when errors were made – they bring a lawsuit.  Intellectual property work, real estate work and plaintiff work have long been known to be higher risk engagements.  However, there is a type of risk that is present in each engagement and that firms should be aware of – conflicts of interest.

Boies, Schiller & Flexner has been in a lawsuit stemming from a conflict of interest claim first made over a year ago.  The conflict of interest arose because the law firm represented a plaintiff in an antitrust suit against a hotel chain that the law firm previously had as a client.  The judge ordered over $250K in sanctions against the law firm for what the judge said was a “blatant conflict of interest.”  The underlying antitrust case was dismissed previously.  Both the lawsuit and the sanctions are going to be appealed, according to the parties involved.

The sanctions went to cover attorney’s fees and the cost to search the databases of Boies, Schiller to prove that the conflict of interest was known and ignored.

This case highlights the need for firms to carefully document, research and act on each conflict of interest – real or perceived.  While it may be profitable to represent clients through a “Chinese wall” or other means, it may cost the firm tens or even hundreds of thousands of dollars to do so.  Having robust and strict internal policies will help.

Law firms vary greatly in the composition of their practice.  Many firms purposefully stay away from higher risk areas of practice to reduce their risks.  However, there are risks that are systematic in all engagements – conflicts of interest being one.  Contact us to discuss ways to protect your firm from systematic risk through lawyer’s professional liability insurance and strong internal risk management techniques.