New Georgia Bar Rules Regarding Conflicts of Interest
An ABA study on legal malpractice claims from several years ago found that the majority of money paid to plaintiffs involved cases with conflicts of interest. Conflicts allow the fact finder (judge or jury) to award attorneys’ fees, punitive damages and a disgorgement of fees paid to the liable lawyer. Worse yet, these types of damages are usually not covered by a lawyer’s errors and omissions insurance policy.
Over the past few months, I’ve been discussing November 2011 Bar Rules changes that may impact your firm and business. Changes to Rules 1.7 and 1.9 related to conflicts of interest require more proactive compliance effort than many other Rule changes. You can view the full details here, but below is a summary of the changes along with some recommendations for effective compliance.
Changes to Bar Rules 1.7 and 1.9: Conflict of Interest
The previous version of the Rules stated that just providing written notice and information to the client about the risks of a potential conflict was enough. That’s no longer adequate. The new Rules require written “informed consent” from all affected clients, current as well as former, but only after:
- Consultation with the lawyer pursuant to Rule 1.0(c).
- Receipt of adequate information about the risks and alternatives to the representation.
- The opportunity to consult with independent counsel.
Are you still using those blanket conflict waivers in client contracts? If so, that may no longer be enough to fulfill your ethical obligations and avoid an allegation of conflicting interests. New and improved Comments like Comment 2 to Rule 1.7 help lawyers identify which types of conflicts are prohibited.
Change can be a good thing, even to Bar Rules
At first glance, these changes appear to help the public at our expense. Lawyers will expend much more energy identifying and waiving potential conflicts. But in the long run, the changes add an extra layer of protection, potentially reduce liability, and may even reduce costs. Following the new Rules will reduce the number of actions where a conflict is pursued. This limits certain types of damages and reduces potential payouts. It may even lower our insurance premiums – only time will tell.
The difference in claim payouts is substantial. For a legal malpractice case with the added allegation of a conflict of interest, the court is free to award general damages, plus attorney’s fees for having to bring the case, plus disgorgement, plus punitive damages up to $250K (no cap for intentional conduct). With an adequate conflict check, damages may be limited only to the value of the collectible underlying case where the malpractice was committed.
It’s time to review and update your conflict check process
Here are some ideas for complying with the new Rules and limiting your chances of a conflict claim:
- Conduct conflict checks prior to discussing a new matter. Avoid instant consults where possible.
- Put it in writing. When seeking “informed consent”, make sure that you supply adequate information about risks and alternatives, and offer the opportunity to seek a second opinion.
- Get it in writing. Make each affected client and former client sign the disclosure.
- Prevent unintended imputed conflicts. Keep your associates from offering free legal advice to friends. You never know where they work or who they know.
- Understand the nuances of the term “good faith professional judgment.” See Comment [2] in the Rules for some guidance.
- Stop using human memory as a conflict checking tool. Update your database to include witnesses, counsel, judges, and even vendors. If you don’t have a database, implement one.
Unfortunately, we won’t know anytime soon the specific long-term effect of the conflict Rule changes. The maximum ethical penalty for a conflict Rule violation is disbarment, so don’t be the precedent-setting case. When in doubt, adopt the stance of better safe than sorry. Seek advice though the GA State Bar ethics hotline, or get a third party opinion letter from practice-focused counsel.
