I’ve talked about the issue of "conflicts" before, but I’m coming back
to it since it occupies a virtually unique position in legal-land vs.
everywhere else in the economy. (In what other industry, in fact,
does it remotely approach its importance to law firms and clients? Intel
not being able to sell its chips to all comers? Caterpillar its
earth-movers? Boeing its jetliners? Yet all of these are,
to say the least, potent products.)
In the wake of the Freshfields disqualification from the Marks & Spencer
takeover battle, Legal
Week has published a feature on conflicts, which is worth reading
in its entirety. Among the salient points: Clients appear
deeply conflicted (no pun, etc.) about what even constitutes an objectionable
"conflict." For example, when asked the completely straightforward
question, "What is your attitude towards a firm you’ve engaged for a
particular piece of advice acting on the opposite side?", the replies
break down:
- never acceptable: 30%
- presumably unacceptable without my consent: 20%
- always acceptable with my consent: 40%
- not a problem at all: 10%
More interestingly from an economic perspective is whether clients
don’t in fact benefit from the expertise of a firm that has
a large "market share" in a particular industry? Developing
a sophisticated and cutting-edge nanotechnology practice, for example,
is not for the faint of heart (or the shallow of pocket): Why wouldn’t
a nanotech startup want to avail itself of the best advice on the market?
Strict notions of conflicts also permit a pernicious form of gamesmanship—certainly
where they are backed up by strict ethical sanctions. When Tony
Soprano was about to divorce Camilla, he "retained" every high-powered
divorce lawyer in New Jersey, so that, in a series of vignettes which
struck one as either cruel or brilliant, Camilla learned on phone call
after phone call that the hot-shot lawyers she wanted to hire were conflicted
out. Please explain to me how this advances the cause of justice
or enhances the image of the bar.
I believe a thorough re-think of the notion of, and the ethical and
economic justifications for conflict "jurisprudence," is in order. The
economic justifications have long eluded me; now the ethical ones are
seeming murky as well.
conflict rules seem only to concern large organizations being attacked by upstarts and isurgents, or between highly antagonistic parties (especially large ones)
in most cases, you do want a highly experienced and engaged professional, as it is the only thing that provides you value for money over and above a staff professional. but when people are trying to muscle out others, or are in a very nasty mood, then they care about conflicts.
I’ve seen one recent conflict ruling (canadian) that makes broad sense. A law firm that helped draft the rules and structures for the regulatory body of the canadian stock exchanges was enjoined from arguing that the body had been improperly formed. this was in a lawsuit against TSX and Regulatory Services (RS). The point being that it would be grossly unfair to depend on someone’s advice on how to set up, and then have those same people use their knowledge of your organization and the possible conflicts to argue that you were wrong for following their advice.
M&S issue seems to be different in that they were simply concerned about knowledge of contract provisions, which can be easily chinese-walled, rather than arguing against the work of the firm.
broadly speaking, however, there is no easy or good way to rule on conflicts, it uses the porn “know it when i see it” test. Thankfully I’m not a lawyer.