Archive for the ‘Lawyers’ category

Conflict of Interest

August 3rd, 2012

Most people understand the basic concept of Conflict of Interest, but it’s actually more complex than it may at first seem.

Competing Interests

In its simplest form, a Conflict of Interest arises when an attorney represents a client who is taking action against another of the attorney’s clients:  If I represent the defendant, I cannot also represent the plaintiff, because I am unable to protect and further both of their interests at the same time.

An attorney, in acting on behalf of a client, assumes what is known as a “fiduciary” role or duty.  This means, on the one hand, that the attorney has been engaged “to attorn for” (act on behalf of) the client.  More importantly, however, the attorney assumes a duty to act in the client’s best interest.  Because that obligation is taken very seriously, in order to fully grasp Conflict of Interest, you must understand that the attorney not only assumes responsibility for the client’s best interest, but the attorney is actually obligated, under the fiduciary duty, to put the client’s interests above his own.

Joint Representation and Potential Future Conflict

Another common Conflict arises when an attorney seeks to represent multiple parties in a joint venture, such as a husband and wife who are doing estate planning together.  While it may not be immediately obvious that this represents a conflict (because it’s certainly in their collective interest to coordinate their estate planning), it may not be in their best individual interest to make sacrifices for the sake of the other’s planning advantages, and we must also look forward to the possibility of separation, divorce, infidelity, etc., and recognize that any of those events would put the parties at odds, and the information they shared when planning together would then become a disadvantage to them individually.  In such a case, we weigh the collective advantage of coordinated planning against the potential individual disadvantage of disclosure, compromise, and sacrifice.  We explain the potential benefits and risks.  The client typically chooses, in such a case, to “waive the conflict.”  That is, the client knowingly assumes the risk of conflict, for the benefit she believes outweighs the risk.  A written agreement is executed acknowledging the risks and benefits, and excusing the attorney from future liability for those risks, should they arise.  (It often requires an acknowledgment that, if a conflict does arise in the future, the attorney may not represent either party, because “she knows too much.”  That is an added disadvantage to both parties, since they must both now get a new attorney.)

Ambiguous Representation

A conflict of interest may arise when it is not entirely clear who the client is.  A common example of this arises when a few partners come to an attorney for assistance in setting up a company.  If the company doesn’t exist, it would seem apparent at the outset that the individuals must be the clients.  More often, however, the intent is that the company is to be the client (but since it doesn’t exist yet, someone has to make the call).  In that case, because the company will be owned by several people, there could arise conflicts between the best interests of the company (to stay in business and be profitable overall) and its individual employees, owners, or managers.  Here, we resolve the conflict by pointing out who the client is (or will be), and set out examples of how conflict might arise, and address how it will be resolved.  In these cases, we may advise the individuals to secure advice from another attorney to ensure that what’s being done with/for/to the company is in the individual interests, so “the people parties” can resolve any disagreements about where the company should go.

Similarly, someone may come to us with a concern about a minor child, or an elderly parent.  We must establish very quickly who will be the client, because we may discover, for instance, that the “concerned” child is actually trying to manipulate the elderly parent and gain an advantage with respect to siblings, to change an estate plan, etc.  Because what the parent wants, and what the child wants, may not be the same thing (and in fact, may be incompatible), the attorney must have a clear idea, before moving forward, whether he’s protecting the elder’s interests, or the child’s, and must act (and protect information) accordingly.

The Lawyer’s Interests

Being a lawyer is a profession.  As a profession, it is also a business.  A lawyer practices law to make a living, in addition to providing a public service.  Because a lawyer is a service provider, reputation is important.  Thus, two of a lawyer’s key “interests” in operating a practice are 1) to ensure she can make a fair living, and 2) to protect his reputation.  It is when these interests become complicated in the representation that some of the most challenging conflicts of interest arise.  The most common conflicts are well recognized, and most lawyers wisely do all they can to ensure that those conflicts do not arise in the first place.  The reputational interests are best protected by the lawyer always striving to act with integrity and professionalism, and strictly following the Rules of Professional Conduct.

Economic Interests

The lawyer’s economic issues are addressed primarily by striving to ensure that, in structuring the engagement with the client, the lawyer’s interests are aligned with the client’s.  In a contingency arrangement, a lawyer’s compensation is structured to maximize the lawyer’s return when the client’s return is maximized:  The more you get, the more I get, so I’m motivated to get you the most I can.  In an hourly engagement, the lawyer provides detailed, transparent billing so the client can assess what value was given for the time spent on a matter.

While it may not be obvious to a client who struggles to come up with a retainer, the very fact that a lawyer requires a retainer up-front is actually an effort to protect the client’s interests.

Think of it this way:

  • Do you like calls from bill collectors?  Do you consider them to be friends, someone “on your team”?
  • Would you be happy with your boss if your boss told you your paycheck would be late?
  • Would you rather your employer gave you an expense allowance (or company credit card) for a business trip, or required you to pay for the trip out-of-pocket and get reimbursed?

A lawyer asks for a retainer because he recognizes that, down the road, things may not always appear to be going your way, or you may be distracted by other matters that come up in your life.  In litigation, the road can be long.  Your circumstances may change.  When things may not look promising, a client might be reluctant to continue paying to move forward (even when the lawyer points out that this is just part of the process).  If a client stops paying, the lawyer is no longer getting paid, and has to become a bill collector.  This puts you and the lawyer on different teams, because the lawyer is now trying to protect his interest – his income for the work he’s performing – while trying to protect your interests by keeping the case moving, doing the job right, and not taking shortcuts to try to fit a project or plan into a newer, smaller budget.  This is conflict.  In the worst of cases, the lawyer may decide he just wants out, because he doesn’t want to continue working if he doesn’t think you’re going to pay (or you’re only going to pay if you win, which we can never promise).

By asking for a retainer that is sufficient to cover the anticipated cost, based on a set of negotiated objectives and goals, the lawyer is assured that he can focus on doing the job, and not worry about having to work for free at some point down the road.  While it is often possible – even necessary – to tailor the work we undertake to your needs and your budget, working out the balance between them is best done up-front.  If we have to make changes to a plan, it’s easier to integrate those changes into a meaningful plan if we haven’t already done extensive work heading down a different road.  Forcing the lawyer to try to fit a new plan into a smaller budget, especially when a good deal of work has already been done, can lead to cutting corners, making ineffective compromises, or in the worst of cases, doing work that isn’t thorough or effective – and nobody wants a malpractice situation.

By coming to an agreement on the overall plan of representation, and ensuring that the funds are set aside to carry out that plan, the lawyer can be assured that you and he will always be on the same team.  After all, if the case reaches a point where you truly feel it’s not worth it, you can almost always pull the plug (or settle) and get back the balance of what has not yet been spent.

Reputational Interests

When a lawyer takes a case, he represents that he believes there is a legitimate legal claim.  In fact, there are both Rules of Civil Procedure and Rules of Professional Conduct that expressly state that a lawyer can’t knowingly bring a frivolous claim, and creating an obligation of due diligence before bringing a claim.  This is one of the few areas where, if a judge issues sanctions in a case, the lawyer can be held personally responsible for court costs, the costs of the other party’s attorney, or even fines.  A lawyer must sign court documents, and it is understood that, by signing those documents, the lawyer is making a sworn statement that he believes the claims are legitimate, and he has gone to some measure of trouble to ensure this.  This is the highest reputation issue – the lawyer’s reputation before the court.

Even when a claim may be legally valid, what we call a “colorable claim,” it may be widely accepted that the claim is not worth the trouble and creates a burden on the court, or seeks to do nothing more than generate fees for the attorney.  In the best of cases, the lawyer who does this often gets a reputation before the bar as selfish and unethical; over time, he gets a reputation for being a shyster and wasting the court’s time.  In the worst of cases, he might actually be charged with a crime known as barratry, which is drumming up cases for the sole purpose of profiting from them.

Beyond the lawyer’s reputation with the Bar, he is a local businessman.  He has to deal regularly with investigators, court reporters, process servers, sheriffs, and local merchants in order to operate.  Like any business person, he is expected to pay his bills on time, to pay what he owes, and to provide value for the money he charges.  This is yet another reason a lawyer tries to ensure that funds are set aside in trust to cover anticipated costs.

Settle or Sue?

November 12th, 2010

Only about 10% of filed lawsuits make it to the courtroom; many disputes that could lead to lawsuits are settled before litigation ever starts.  One of the primary reasons for this is the concept of settlement.  Once the parties bring the facts out and lay out their respective views of the situation, it is often discovered that there is a solution the defendant can offer and that the damaged party is willing to accept to resolve the dispute.  For instance, in an employment discrimination situation, the employer may be willing to pay some amount of back pay in order to get the employee to drop a lawsuit (or the threat of a lawsuit).  Likewise, many employers are often willing pay severance in exchange for a release of liability or a waiver, for the reassurance that there will not be a surprise lawsuit in the future; in modern business, severance is no longer a thank-you for years of service and an apology for hard times, it’s an insurance policy against a lawsuit.

The question of whether or not to accept a settlement offer always rests with the client.  This is not to say that the attorney won’t have recommendations or advice on the value of a settlement with respect to the potential value of a lawsuit.  An attorney can offer advice or insight on whether an offer to settle is reasonable or fair in a particular situation, or under specific circumstances.

The decision of whether or not to accept a settlement is often a difficult – even gut-wrenching – decision, often not made until you’re coming down to the wire, nearing a deadline for filing suit under a statute of limitations.  Or, it may be the result of a negotiation that is made shortly before someone files for summary judgment, or moves to have a case dismissed.  In fact, settlement has become so common, that in many cases the court will order the parties to attempt to settle through a mediation process at some point along the litigation timeline, to see if the parties can come to some agreement if they’re forced to sit down and hash it out.

The decision is a difficult one because, in making the decision to settle, there are upsides and downsides, benefits and disadvantages.  The biggest benefit to a settlement is finality.  If you pursue a dispute in litigation all the way through to hearing before a judge or a jury, even if you win, there is always the possibility that the other party will appeal the decision or the amount of an award.  In the end, after even more legal wrangling, the decision could be overturned or modified, further delaying (or eliminating) compensation.  This can go on for years in the worst of cases.

A typical federal lawsuit can be expected to be “in court” for about 18 months, even for a case of only modest complexity.  (This is the case for most employment discrimination litigation.)  This is on top of any time you spent waiting for investigation and permission to sue from the EEOC or the Department of Labor – typically 60 days to 6 months – and preparing your case for filing.  It can be a very expensive, drawn-out, and emotionally exhausting process.  Therefore, the prospect of finality and closure early on, allowing you to recover some of your losses and move on, can be very appealing if the offer is reasonable.

In getting that finality, in cutting the process short, you’re making a trade-off.  You’re giving up something for what you’re gaining.  The trade-off for that finality is that the settlement is limited to concrete, clearly identifiable damages.  You’re far less likely, in a settlement, to get compensation for “pain and suffering,” emotional distress, inconvenience, and embarrassment, than you would from a jury after trial.  While the award may be considerably less, it’ll come much sooner.

Resolving the dispute earlier has the advantage that you don’t spend months or years of arduous and agonizing telling and retelling, analyzing, and rehashing the situation that already put you into a position of hardship; it allows you to close the book and move on with your life.  Drawing the process out for a couple of years could make that part of the process much harder.

With all of that being said, settlement has downsides.  Almost every settlement is accompanied by some sort of waiver or release of future liability; you’re calling your claim done, and agreeing not to sue for anything else.  It almost involves a statement of no admission of guilt, if you’re hoping for an apology or a declaration of responsibility, a settlement means you’ll be passing up that satisfaction.  A settlement will almost always come with a confidentiality agreement or limitation on disclosure – a gag order.  So, if part of what you hoped to accomplish was publicity or exposure of a problem, a settlement will likely defeat that purpose; you’ll be barred from any public discussion of the matter.  (One exception to this rule is if the defendant is a public agency or a branch of the state, or if the lawsuit is brought by the government itself, public records requirements will often require that at least part of the agreement be disclosed.  This is more likely to happen in a high-profile case, where the dispute itself was already public.)

The balance of these factors will vary by the nature of the damages, and the sort of compensation you’re seeking.  Compensation for “soft” injuries – non-specific damages like pain & suffering, insult, emotional distress, humiliation, or damage to reputation, many of those damages will not be addressed in a settlement.  If, on the other hand, you just want to be paid for what happened, to cover medical expenses or lost work, income not covered by unemployment, a settlement may very well make you as close to whole as you can expect to get.  If you’re suing “on principle,” you’re likely to defeat your purpose in seeking a settlement, unless the settlement includes a statement of principle, a public apology, etc.

Your attorney can (and should) review with you the facts of your case, their relative weakness or strength with respect to the claims you could bring, and discuss whether those facts are more likely to be relevant at settlement or litigation, and how they will bear, respectively, on your prospects and likely outcomes.

Common Motivations for Litigation

It’s not about the money; it’s the principle.  No, it’s not.  While there may be a principle involved (there are basic principles and goals underlying the Law, after all), if there’s no monetary damage involved, you’ll have a hard time finding an attorney to prosecute your case (unless “the principle” is important enough to you to pay for it out of your own pocket).  Ultimately, with the exception of injunctive relief (making someone do something, or stop doing something – both of which can be very difficult), the courts find it difficult to grant relief that is not monetary.  Even pain and suffering, personal loss, and grief must be reduced to some amount of monetary damages, because that’s the easiest way to make it compensable.

I just want closure.  There are no zeroes in “closure.”  While the “oh” may look like a zero when you type it in caps, money will not get you closure.  It will help you catch up bills, but it won’t help you heal.  The healing, the inner peace, must come from within.  Litigation may actually delay your ability to find closure and move on, since you’ll be spending months reliving the situation that brought you there, leaving you more bitter because the litigation process comes to be seen as a further wrong that you’ve been forced to endure.

I just want an apology.  You will not get it.  If you settle, the first thing the Settlement Agreement will say is some variation of “Without admitting guilt, and acknowledging that the facts are disputed….”  The very idea of a settlement, to many defendants, grows out of the desire to avoid going on the record as having committed a violation or broken a law.  To the defendant, avoiding a public record of wrongdoing has a value.  On top of this, the Agreement will almost always have a confidentiality clause, which would make an apology irrelevant, because you will almost certainly walk away with permission to say nothing more than “The matter has been resolved.”  If it goes to trial, the jury will find them liable or not liable, and the closest thing to an apology you’re likely to get is a formal statement that they will not commit a particular violation again.  In any other circumstances, an apology would amount to an admission of guilt, and you can rest assured that is not going to happen in any but the rarest circumstances.

I want to make them hurt.  You won’t.  While this is understandable, “they,” like you, will hire an attorney.  (In fact, in most jurisdictions, a corporation must be represented by an attorney.)  They want to make you work for anything you get.  Therefore, most of the accusations, arguments, and discussions will be between your attorney and theirs, and the actual employees will only be involved for the purpose of collecting, organizing, and clarifying facts, and you’ll only see them in depositions or hearings (if you make it that far).  “They” will do all they can to insulate themselves from you, and you can be reasonably certain that they’ll have gone back to work and moved on, giving little thought to the dispute.  The smaller the defendant, the more likely they’ll take it personally, but by the same token, the smaller the defendant the less likely it will be cost-effective to sue in the first place, unless you know ahead of time that they’re insured against the sort of claim you’re making.  If the defendant is a large corporation or a government body, they probably have insurance to pay for this sort of mistake, so it won’t really affect their bottom line in any serious way, and they have a staff to manage any impact on their reputation.