Examine ethical, professional and business risks
of potential representations
By Emily Eichenhorn
The criteria firms use to accept or reject potential representations are as varied as the cases themselves. Ultimately, though, every standard may be categorized under one of three questions: Is accepting this case a sound ethical decision? Is it a wise professional decision? And is it a prudent business decision? This three-pronged analysis is not uncommon, though it’s often conducted unconsciously. From a risk management perspective, a more deliberate evaluation of potential representations built around these issues may help you avoid costly professional liability problems.
Ethical considerations should represent the initial litmus test. Are there ethics concerns that prohibit you from accepting the representation? While other rules may be implicated – including those regarding competence, restrictions against frivolous actions, and rules prohibiting use of your services in furtherance of a crime – most often, the answer to this question rests in the conflict-of-interest rules. Conflicts may be obvious, but rarely are. Typically, there will be room for interpretation. For example, there may be potential for conflict in the future, but none manifest right now; the conflicts that exist arguably may be waivable if the clients are informed appropriately; or the conflict might be 'curable' through screening of affected personnel. Your ultimate conclusion about whether the rules will allow you to accept the representation is frequently guided by your appetite for risk, at least in part.
Once you’re satisfied that ethics rules don’t prohibit you from accepting the representation, the second step in the analysis is to consider the general riskiness of the representation from a professional liability standpoint. In other words, what’s the likelihood that you’ll find yourself faced with some sort of action against you if you move forward with this particular client or matter? Without question, certain clients or cases present greater risks than others, and your reputation and earning ability is at stake with every representation decision you make.
Let’s consider some of the riskier clients and matters and why they present the risks they do.
Clients on a mission. Lawyers know that, in every representation, no one ever comes out completely satisfied. Plaintiffs rarely get everything they asked for, and defendants, even those that win, have had to pay to prove what they knew was right all along. And every transaction requires compromise. Starting with that premise, we know that clients who are acting purely to prove a point or establish a principle never will be fully satisfied with the representation. And dissatisfied clients are more likely to sue you.
Shady or shifty characters. If you’re dealing with someone who treats other people poorly and less than honestly, consider how they will treat you. Could you rely on the information they give you and their agreements to cooperate? Probably not.
Uncooperative people. This is the person who says, 'I can’t show up for the deposition on Tuesday because I play golf that day,' or, 'What do you mean I have to let them go through all my files? Never!' While your client drags his feet and dodges your phone calls, you’ll be the one asking the other side or the court for extensions of time. After their patience runs out, your client likely will be unsympathetic when sanctions negatively affect his case.
'Bet the farm' transactions. By definition, clients who invest everything they have in a deal have nothing left to lose if the transaction fails. So, they may as well try to recover whatever they can – and your apparently deep pockets make an attractive target.
The lousy deal or case. In a similar vein, you’re less likely to be sued when your client wins or gets the upper hand in the deal. So, it follows that a deal or case that looks to be doomed from the start is a far riskier proposition than those with some potential upside. Ultimately, the biggest problem with such representations may be the client’s unrealistic expectations. You should raise a red flag any time you encounter a potential client who appears not to comprehend the true weakness of his matter.
Lawyer-hoppers. If people keep firing their lawyers, or their lawyers keep dropping them, there probably is a reason. Do they have unrealistic expectations? Do they have an unrealistic view of how much power they can wield over you? Do they fall into one of the other 'risky client' categories? A good rule of thumb: Consider being someone’s second lawyer on a matter, but rarely – if ever – be willing to be their third.
Relatives or friends. Your willingness or ability to steer these clients away from bad choices or ideas may be hampered by your relationship. Can you really tell Aunt Tilly that she is making a mistake trying to wrest another several thousand dollars from the defendant? Secondarily, your motivation for keeping up to speed on these matters may be lacking, especially if they are not paying customers.
Matters you have no interest in. These cases are the ones that get neglected, either because the matter doesn’t challenge you or, frankly, because the client does things that irritate you. They are pushed to the corner of your desk or into the box on the floor. And before you know it, you’re hopelessly behind and in danger of missing a critical deadline. The most important thing to remember with respect to these matters is that almost everything looks interesting when it’s new. So, don’t get trapped.
If the proposed representation clears the second hurdle in the analysis, the final and possibly most critical part of the analysis is the representation’s potential impact on your business. Except in the rare case of clearly delineated ethical prohibitions against taking on a representation, business reasons ultimately will guide whether or not you take a representation. Although it is addressed last, it is this prong of the analysis that ultimately steers the outcome of the previous steps.
With all cases, you must consider whether there is a compelling business reason to 'force' yourself to proceed against difficult odds, or to turn away something you’d otherwise consider desirable. For instance, a case may seem to represent your opportunity to step into a new area of practice, or appear to give you a foot in the door with a desirable client. Or, you may feel that if you reject a matter from a long-time client you may hurt your relationship.
And I’m sure some of you have found yourselves in this situation: You’ve tried for months to get work from a particular company. You’ve attended Kiwanis meetings, sought out the Stairmaster at the health club next to its CEO, and generally kept at it. One day, the general counsel finally comes to you with a deal, but time is short and she needs lots of resources on it for the next two weeks. You are swamped, but you feel like you can’t turn her away because you’ll lose this chance you’ve been trying for. There is a real risk that the pressures will cause you to either do less than the quality you’ve sold to her, or you’ll have to scrimp on someone else’s matter. And that is a recipe for trouble. It is important to remember, too, that any new matter requires some up front work. Even a plaintiff’s personal injury action that may have a two year-limitations period requires some up-front work to determine exactly how long you’ve got to wait.
Whether you choose to forge ahead with her deal, or wait for a time when you’d be better-equipped to handle everything it puts on your plate, will be determined ultimately by your appetite for business risk. The more risk adverse you are, the less the business concerns carry weight, and vice versa.
Ethical, professional and business implications all are legitimate concerns that have a place in the risk assessment you should make every time you are presented with a new representation. Remember, there is no need to do such analyses in the dark. Talk with others in your firm or with experts in the field of ethics, if necessary. But, try to follow the process consciously so that you can effectively comply with your risk appetite and come out with decisions that are comfortable for you. That way, if you do choose to take something other than the safest route, you’ll do so with your eyes open and be prepared to exercise as much other risk management as you can to deal with the risk as effectively as possible.
ABOUT THE AUTHOR
Emily J. Eichenhorn is director of lawyer risk management for CNA, a provider of lawyers’ professional liability insurance. She lectures and writes regularly about law firm business management, risk management and professional responsibility issues.
© 2003 Emily J. Eichenhorn