Costly Conflict

Solicitors have an absolute duty to act in the best interest of their Clients. This is a cornerstone for the Legal Profession. Part of this duty is to ensure that you do not act where there is a conflict between your own or your clients’ interests. In contentious matters, solicitors will not act for both sides as their interests will conflict.

So what happens when solicitors do act when there is a conflict of interest? In a very salutary tale, the London Office of the international law firm White & Case LLP found themselves on the wrong end of a £250,000 fine by the Solicitors Disciplinary Tribunal.

In summary, White & Case and one of their Partners Mr Goldberg, started to work on a litigation matter for a Mr P in September 2010. Its targets were a Mr B and a Mr K. By December 2010, there had been some kind of settlement and the matter had gone quiet. In April 2011, the New York office of White & Case started work on a corporate restructuring matter. This corporate matter concerned companies ultimately owned by B and K. It was a big matter with fees of around $900,000 and many lawyers involved. The lawyers acquired detailed information about the assets of B and K but they were not clients. A conflict check was undertaken which identified the previous dispute involving B and K but Mr Goldberg said it was all finished.

Most of the corporate work was done between May and September 2011 but some aspects continued until its closure in May 2013. Meanwhile, the litigation matter revived in May 2012. Unfortunately, Mr Goldberg forgot he had earlier been asked about the conflicts on the corporate matter and did not carry out any new conflicts check. He also failed to put up information barriers around the two matters to prevent the risk of leakage of confidential information from the corporate matter to the litigation matter. This was important as P wanted to sue Band K and the nature and whereabouts of their assets were therefore relevant.

In November 2012, Mr Goldberg carried out a conflict check and identified the corporate matter. After discussing the potential conflict with partners on both matters, they concluded there was no conflict, relying in part on conflict waivers provided by the clients.

Again no information barriers were put up at that time although at the time court proceedings were issued in around March 2013, information barriers were put around the two matters.

In October 2013, the clients on the corporate matter expressed concern about the situation and applied for an injunction against both offices of White & Case in November 2014 which was granted in January 2014. As they are required to do, White & Case self-reported the situation to the Solicitors Regulation Authority.

A case of human error and failures of procedure led to the Authority into making one of its largest fines. No doubt the level of fine was influenced by the amount of revenue that the Firm had generated dealing with these two matters.

If you find that your solicitor is acting in a position of conflict, you may need separate independent advice on dealing with the situation. This could lead to a claim for Professional negligence and breach of contract and as we have seen in this particular case, a referral to the Profession’s regulator. Lesson learnt?

Head of Dispute Resolution at Chattertons, David Rogerson, Direct dial : 01636 675563