Lateral moves in the legal community are common and occur for several reasons. As a law firm, you may seek the expertise, passion or enthusiasm of new talent, while attorneys consider lateral moves to avoid stagnation, spur professional development or gain new perspective. Still, it’s important to plan carefully to minimize the risks.
If your firm is considering a lateral hire, avoid exposure to potential litigation and prevent conflicts of interest by observing these tips. Make sure you can thoroughly answer these questions:
What is the current status of the other firm?
Ensure you know the current status of your lateral hire’s soon-to-be-former law firm. Make sure to ask these questions:
- Is the firm financially sound?
- Is the firm on the verge of bankruptcy?
- Has it initiated bankruptcy proceedings?
- Is it dissolving the law practice?
Bankruptcy law requires the recovery of money already paid to a partner when the firm was insolvent. Assurances from the lateral hire may not be enough, as a liquidation trustee may not agree.
Are there legal constraints to consider?
Do any legal constraints exist in relation to a partnership agreement, restrictive covenant provision of an employment contract or other contracts between the lateral hire and the former law firm? Would a lateral move trigger such a provision?
Does the other firm have a history of taking legal action?
Has the former law firm filed lawsuits against past laterals or their hiring law firms? A track record of the soon-to-be-former firm that includes allegations of pre-termination solicitation or improper client notice, misappropriation of law firm property, breach of fiduciary duty or poaching of support staff or attorneys could spell trouble for your firm.
Does the other firm have a history of cooperation?
In prior lateral move situations, did the former law firm work with the lateral to provide notice to law firm clients? Ideally, the soon-to-be-former law firm would conduct the client notification process in a professional manner, as this is in the best interest of clients. If there has been a history of noncooperation, this would be important to know.
How has a firm handled past client notice?
In previous lateral moves, how were the clients of the soon-to-be-former law firm provided notice of attorney departures? Joint notice by the transitioning attorney and the former firm allows for more oversight and may reduce the risk of litigation. However, ethical guidelines also allow prior notice when deemed necessary to meet obligations to clients.
Does the lateral understand proper firm property handling?
Does the lateral understand what, if any, materials or information may be removed from the former law firm? To reduce exposure to potential litigation, the lateral hire should take care to act lawfully in taking or utilizing the former firm’s information or other property.
Should your firm engage a third party?
Should you engage a third party to conduct a conflicts of interest check related to the lateral and your law firm, the lateral’s clients and your law firm or the lateral clients and your attorneys? To minimize risk, the hiring firm and the lateral hire should work together to perform an appropriate conflict check while not breaking the attorney-client privilege or ABA Model Rules 1.6, 1.7, 1.8, 1.9 or 1.10.
Do you know which Model Rules apply?
Has the amended ABA Model Rule 1.6 been adopted within your jurisdiction? This rule is instructive regarding the type of information that may be disclosed to address potential conflicts of interest. However, you should refer to the specific adopted rules and comments within your own jurisdiction for guidance.
Are you following the proper ethical guidelines?
Is your firm following the suggested guidelines of ABA Formal Ethics Opinions 09-455 and 99-414? Formal Opinion No. 09-455 notes the importance to “not compromise the attorney-client privilege or other prejudice a client or former client” in the process of detecting and resolving conflicts of interest and discusses the retention of the services of an intermediary lawyer. Formal Opinion No. 99-414 provides guidelines for notifying clients prior to the attorney notifying the law firm, if deemed necessary.
Is your firm protected by professional liability insurance?
Are there professional liability policies in place to address any and all potential matters resulting from the lateral move? Appropriate liability coverage should be a priority for the lateral attorney, hiring law firm and the soon-to-be-former law firm. You should ensure you have a clear understanding of the various coverage in effect and how they will or will not apply to the lateral move of the attorney. With professional liability insurance you can help ensure your firm is better protected in a lateral move.
All parties involved in a lateral move of an attorney from one law firm to another are exposed to risks related to the transition, including the hiring law firm. Not only is it imperative to protect the interests of your current and former clients and firm attorneys, a hiring law firm must also work to protect the lateral hire and any potential clients transitioning with them. With careful planning, you can execute the logistics of a lateral move while minimizing the risk to your firm, your new lateral hire and existing and transitioning clients.