On Conflicts of Interest and Waivers of Conflicts

A minor billing issue I often come across is attorneys billing to do a conflicts check and also to work on clearing a conflict.

As all practicing attorneys who read this blog know (at least I hope they all know), attorneys have a mandatory ethical duty prior to taking on a new matter to make sure that no conflict of interest (COI) exists at the outset or during the course of the representation.  It should be noted that this duty to check for COI must be done for all current and former clients not only of the attorney but also for all other attorneys in the firm.  See ABA Model Rules of Prof. Conduct (RPC) 1.7, 1.9.

And as all practicing attorney know who read this blog, conflicts checks are usually done by an attorney’s support staff along with other rote administrative tasks related to opening a new file.  Such “file opening” tasks are considered to be part of an attorney’s overhead and non-billable.  See Disabled Patriots of America, Inc. v. Niagara Group Hotels, LLC, 688 F.Supp.2d 216 (WD N.Y. 2010)(charges for tasks to open/close a file are considered “part of general office overhead.”).

When a possible or actual conflict presents itself, attorneys may attempt to clear the conflict so long as the client is in agreement to do so.  Often that involves getting appropriate waivers from both the client and another current or former client.

With regard to getting a conflict waiver from a client in an insurance defense matter, care should be taken to ensure that waiver is limited to an actual conflict and that the attorney does not overreach and also seek a waiver of a “potential” or future COI that might arise during the course of the representation or afterwards.  While the RPC do provide that an attorney can obtain a waiver for potential or future conflict (based upon “informed consent”), an ethical question is presented as to whether it is ever appropriate to even ask certain types of clients to waive potential or future COI.  According to ABA Ethics Committee Op. No. 05-436 (Informed Consent to Future Conflicts) waivers of future COI are not appropriate for “non-experienced users of legal services.”  This would describe the typical insured who is not a major corporation.

In any event, it should be more than obvious that an attorney should not bill for those things that the attorney is otherwise obligated to do by the professional rules.  Those things should be considered as part of an attorney’s overhead.  If an attorney were allowed to bill extra for something that the attorney is otherwise required to do by the professional rules then the attorney would be able to bill extra for other mandatory ethical obligation such as reviewing legal bills for accuracy before being send out.

To make obvious that which should otherwise be obvious, I am always sure to make it clear when drafting litigation and billing guidelines for a client company that the COI check and any work to clear a COI is non-billable.

Are your company litigation and billing guidelines compatible with the ABA Model Rules of Prof. Conduct?  Do they provide for appropriate reductions that are based upon an attorney’s ethical duties as to what the attorney can and cannot bill for?  If not or you are unsure, please feel free to contact me for an analysis.

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