The Problem

New parties that become involved in transactions or litigation matters after initial conflict checks have been performed, or changes in the ownership of clients, can pose serious conflict problems for law firms if they are not identified in a timely and proactive manner. This era of prolific mergers, acquisitions, divestitures and start-ups only exacerbates the already difficult problem of identifying and dealing with potential conflicts of interest on an ongoing basis.

Most firms identify post-file opening conflicts as a significant risk management concern. These same firms readily admit that they don’t have an effective system or procedure in place for systematically performing ongoing conflicts checks after files are opened. There are no institutional "hammers" such as a file opening process which prompts supplemental checks. It is incumbent upon individual attorneys and support staff to advise the conflicts staff of new parties to litigation or transactions.

Some Solutions

Use Your Calendar Systems

One simple but often overlooked solution is to issue regular, periodic reminders through central law firm calendars. In order to prompt attorneys to request conflicts searches after matters have been opened, law firms should use their automated docket systems to provide reminders. Every new matter, whether it be a litigation matter, a patent prosecution, or a project financing should be assigned several interim review dates which can extend as far into the future as desired, most likely until the matter is closed.

Conflict search reminders can be monitored by the conflicts staff or by other designated firm employees. Attorneys must verify that they have reviewed the docketed matters for new parties, and that any new names have been searched for potential conflicts. If verifications are not in the file, the individuals monitoring this system will contact the attorneys.

Some Pilot members have instructed their records manager to retain a copy of the original conflicts check which reflects all parties. The records manager forwards a photocopy of this list to the appropriate attorney(s), paralegal(s) and secretary(s) three months after the case was opened with a note asking whether any names have been added. Some firms also repeat this procedure six months after the case was opened.

Perform Annual Reviews of Business Entity Clients

Law firms can perform formal reviews of business entity clients annually. The purpose of such an update is to identify, for ongoing conflicts purposes, the following: 1) significant management or board of director changes; 2) structural changes; 3) acquisitions and divestitures; and 4) critical personnel departures.