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Law firms may regret it if they treat a prospective lateral hire with kid gloves just because the lawyer can bring lots of business to the firm and wants a quick decision, according to a March 2 panel discussion at the 16th Annual Legal Malpractice and Risk Management Conference.
A law firm trying to land a star should still adhere to its usual protocols even if it means working overtime to clear conflicts of interest and check out the candidate, speakers said at a session entitled “Tales From the GC’s Office: What’s Keeping Law Firm General Counsel Busy.”
Monitoring the process of bringing in lateral partners is a big concern for general partners at law firms.
“The lateral wars are so rough and tough that you really need good procedures to make sure problems get picked up,” moderator Janis M. Meyer, of Hinshaw & Culbertson LLP’s New York office, said.
An initial question that firms must confront when considering a lateral hire is how far to check back for conflicts of interest.
In audience polling on this issue, the largest group of respondents—32 percent—said they look back three years, and another large group of respondents—25 percent—said they check conflicts going back more than six years.
Among the other respondents, only 3 percent said they look back less than three years, 14 percent said four years, 19 percent said five years, and 3 percent said six years.
Panelist Laura R. Giokas, general counsel/partner in Bryan Cave LLP’s St. Louis, Mo., office, said she’s seen the three-year figure turning into the norm.
Giokas said she was surprised at the responses about looking back more than six years. “That’s a lot of data to collect and gather,” she said
It’s great if you can get people to cooperate and provide that information to you, Giokas said. But it still doesn’t solve the problem of a lateral not remembering a conflict issue, she said.
Fellow panelist Matthew K. Roskoski noted that the older the information is, the less accurate it tends to be. But at the same time, “conflicts don’t age out,” he said.
So I’d look back as far as I could get away with, Roskoski said. He’s deputy general counsel at Latham & Watkins LLP in Washington.
As a springboard for the panel discussion, Meyer used a hypothetical featuring a lateral who’s brought into a firm at top speed, and then turns out to be a bad bet. The hypothetical lateral was a star in his field with offers from multiple firms.
Because of the competition for him, the firm decided not to put out a lateral questionnaire and it settled for two years of information.
Giokas said firms shouldn’t forgo a lateral partner questionnaire. Firms need to have “intestinal fortitude” regarding lateral hires, even when they’re stars, she said.
We gather information through questions on the lateral partner questionnaire, and we also do our own due diligence, she said. If we come up with a tax lien or foreclosure or civil litigation that’s not disclosed on the questionnaire, that’s certainly a red flag for us, and could cause us to move away from that candidate, she said.
“If you don’t have the opportunity to get those answers and get that information and do your own vetting, then you’re really in put bad position down the road if things don’t work out,” Giokas said.
Regarding conflicts information, Giokas said she didn’t see a great distinction between two years of information and three years. “Just get the information,” she said.
Even if the high-maintenance lateral doesn’t have the information you need in your preferred format, you can work with the information, she said. “You can push back and ask questions, and do it in a timely manner,” she said.
This can be a very difficult scenario, especially when you have a potentially very good lateral hire, but you can’t deviate from your standard protocols that you’ve established, she said.
“This is categorically a nonstarter,” Roskoski said about the idea of short-cutting the firm’s vetting process. I don’t buy at the sale that ends today, he said.
Cutting corners doesn’t make any sense from a cost-benefit perspective, Roskoski said. It’s not that hard to fill out the lateral partner questionnaire, and it’s not that hard to do due diligence, he said.
The cost of having conflicts staff work overtime and weekends is minor compared with the consequences of getting disqualified in a matter, Roskoski said.
Meyer polled the attendees on whether they conduct background checks on all lateral partners.
Nearly a fourth of the respondents—23 percent—said they don’t do background checks on prospective laterals.
Giokas said she found that surprising and expected that everyone would do background checks.
Roskoski agreed. “Our clients insist on it,” he said.
Meyer noted that outside counsel guidelines in a lot of areas require background checks of all personnel, not just lateral partners.
Giokas said Bryan Cave has two types of background checks. It has a standard background check that the human resources department does, and it also has library due diligence that does checks such as Googling, social media searches and searches for litigations, she said.
We use a vendor, Roskoski said. It’s a good thing to do background checks for everyone because then it’s more palatable, he also said.
Meyer said her former firm did background checks for everyone. “It was a big pain in the neck in some ways,” with lots of false positives, she said.
Roskoski noted that many firms have offices in “ban the box” jurisdictions that require employers to limit or delay background checks. Firms need to be mindful of those regulations, he said.
Firms should also think about cross-jurisdictional background checks, Roskoski said.
The panelists agreed that as it can help to have prospective laterals talk to other people in the firm, such as associates and staff.
Roskoski said it’s hard to pick up in advance whether a potential lateral will be rude to other partners or staff. Our experience is that people who have trouble adjusting to the firm’s culture interviewed just fine, he said.
We make laterals interview with associates, and sometimes that surfaces fit and culture problems, Roskoski said.
Giokas said Bryan Cave gets prospective laterals to talk to the firm’s conflicts analysts. Sometimes laterals get very annoyed during the conflicts-checking process, she noted.
It’s a good clue that laterals won’t fit in the firm’s culture is they feel it’s a waste of time to deal with conflicts issues and talk with people they wouldn’t regard as their peers, she said.
Giokas said that if staff members and other partners complain about the lateral’s rude manner once he’s there, there’s often reluctance to deal with it, especially if the lateral is a rainmaker.
But if you ignore it, “it’s a walking claim” either by someone in the firm or a client, Giokas said.
It’s important to get management involved and have a conversation about firm culture, she said.
Suppose the firm hires the star lateral, and he brings in high-profile clients during what Meyer described as the “honeymoon period” for lateral hires.
But after a few months, he tells the managing partner that he’s been served with a disciplinary complaint from one of his former clients, and he asks the firm to defend him.
Roskoski said Latham & Watkins does ask laterals about disciplinary complaints. It’s part of the lateral partner questionnaire, he said.
It would be a serious issue if the attorney had already received a disciplinary complaint that he didn’t disclose on the questionnaire, Roskoski said. Giokas expressed full agreement with that view.
Meyer asked if the lateral’s new firm would pay for his lawyer in the disciplinary proceeding.
Roskoski said that if the lawyer had received a malpractice complaint, that’s the other firm’s problem.
But depending on the nature of the disciplinary complaint, disciplinary investigators may be asking about the lawyer’s current practice too, Roskoski said. At the end of the day, this is your lawyer and your firm, and if the lawyer is sanctioned, that reflects poorly on your firm, he said.
If the conduct happened at another firm, one of the new firm’s lawyers might be able to handle it if there’s some good reason why the prior firm isn’t picking it up, Roskoski said.
You have to dig into the facts and maybe talk to the prior firm, Gioskas said.
From the audience, Anthony Davis, of Hinshaw & Culberton’s New York office, asked what the panelist would do if the lateral said he wanted to defend himself in the disciplinary proceeding.
Giokas said it would depend on the complaint. There are frequently pro se complaints that the bar won’t really dig into, she noted. If it’s a more serious situation, that’s another red flag about this lateral hire, she said.
Roskoski pointed out that the firm’s name is on the line in this situation. “I’ve never had a lawyer receiving a disciplinary complaint be anything other than petrified,” he said.
“Even when it’s a frivolous pro se complaint, they still want all the help they can get,” Roskoski said. If they want to self-represent, we would be asking about personality disorders, he said.
Meyer related her experience on this issue in her prior role as general counsel for the now-defunct law firm Dewey & Leboeuf. One situation involved a lawyer who insisted on representing himself but submitted an answer that was unintelligible because he was so wrapped up in the case. “So I went got him a very tough lawyer who could yell at him,” she said.
In another situation, the accused lawyer knew the facts, was calm about the problem, and did a beautiful job, Meyer said.
For the hypothetical lateral partner, another problem comes up. The firm discovers that he’s submitted phony expenses for entertaining high-profile clients, and he finally admits, after a forensic audit, that he has a gambling problem.
Roskoski posited one approach to identify the gambling problem before deciding to bring in the lateral: challenge him to a game of baccarat and see if he knows how to play.
More seriously, Roskoski extolled the benefits of having an internal audit department. They run metrics that highlight expenses that are likely to be problems, and they do spot checks. They would catch this guy quite quickly, he said.
This particular loss happened to be the firm’s money but it could just as easily have been client funds, and that’s a disaster, Roskoski said.
“In my view, rigorous and consistent internal audit is absolutely worth the spend,” Roskoski said.
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