Conflict Checking Systems from A to Z
By Jim Calloway, Director, OBA Management Assistance Program

A sometimes troubling issue in law firm management is developing an appropriate system for checking conflicts of interest. Every lawyer or law firm, no matter how small or how limited the practice area, must have a conflicts database and a procedure by which it is consulted and the review is logged.

The comfort levels and needs of the individual lawyers or firms should determine whether this is accomplished with a sophisticated dedicated database system, a spreadsheet, a set of file cards in the ledger or a series of word processing documents. (Although no one familiar with this writer’s work should be surprised to read the opinion that digital systems are superior to paper ones.)

While the basics of a conflict of interest checking system might appear to be simple, in practice it is fairly challenging to develop a “bullet proof” system in today’s world. Business entities seen to change their names or merge more frequently than in the past. Individuals also change names. People also tend to change phone numbers and other contact information (or move) more frequently.

This article will discuss the basics of setting up and managing a conflict of interest system, both on paper and using technology. Hopefully most law firms already have a good conflict of interest checking system, but this treatment should provide some opportunities for everyone to fine-tune their process.

When dealing with conflicts of interest questions, it is always useful to review the substantive law under the Oklahoma Rules of Professional Conduct. The primary rule is Rule 1.7. Conflict of Interest: General Rule.

(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:

(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and

(2) each client consents after consultation.

(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests, unless:

(1) the lawyer reasonably believes the representation will not be adversely affected; and

(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

Rule 1.9 (Conflict of Interest Former Client) is another rule of broad application. It is fairly straightforward to not take a conflicting position to your client’s position in matters you are working on every week. It is not so obvious, but equally important, to avoid certain conflicts on files closed two years previously.

The issue of conflicts is also covered in Rule 1.8 (Prohibited Transactions), and Rule 1.10 (Imputed Disqualification of Firm.)

We must note that the Official Comment to Rule 1.7 provides in part:

“The lawyer should adopt reasonable procedures appropriate for the size and type of firm and practice, to determine in both litigation and non-litigation matters the parties and issues involved and to determine whether there are actual or potential conflicts of interest.”

To paraphrase, adopting an appropriate conflict checking system is not optional.

Many situations of conflicts will be clear-cut. However, there will often be times where a lawyer’s judgment must be applied to the facts of his or her particular situation. This article will not cover the substantive law of conflicts. A good conflict of interest checking system is designed to bring matters to the lawyer’s attention so that such a determination can be made.

Elements of the System

A poor or irregularly-used conflict of interest system is as bad as having no conflict system at all. One should understand that a good conflict checking system will yield some “false positives” fairly regularly. Unlike testing in the medical field, this is desirable because the goal is for the lawyers to be aware of any potential conflict that is even a close call.

There are different approaches to setting up conflict systems depending on the size and type of office, but all effective systems have certain things in common.

1) Everyone in the office can access the system and knows how to use it.

2) Information is retained about at least all parties connected with litigation and all of those whose interests directly conflict with those of the client in transactional matters.

3) The checks are conducted at the three critical points in representation: a) before an initial consultation with a potential new client, b) before a new file is opened and c) whenever a new party enters a case.

4) Inquiry is made for maiden names and other prior names and these names are also entered into the system.

5) Information entered for each individual (or entity) shows the relationship to a client or lawyer as well as a reference back to a file or files. The conflict checking system may “outlive” the actual files, which may be destroyed pursuant to the firm’s file destruction policy. So some brief reference to the relationship must be recorded within the system. (e.g. “John’s client – first represented 1999” or “critical fact witness in the 2002 Happy Valley construction litigation”)

6) The system is well documented. Instructions on how to use the system are in writing and are required reading for every new hire. Reviews of the system with all staff are conducted annually. Conflict searches are documented by the person who does them.

Typically this documentation is contained within the physical file if there is one and on a separate chronological ledger when there is no open file. However, some may feel more comfortable with all conflict checking operations being recorded in a centralized chronological ledger and hand written notes (“conflict check done on Smith by Jodie M. 10-5-06”) being placed in the file.

What Type of System?

As with so many business systems, it is sometimes helpful to examine how the system would be organized and maintained on paper before building its technological analog.

Index Card and Ledger System

The traditional conflict system uses index cards to keep track of names and relationships. After a potential client consults with the lawyer, a card is completed with the client’s name at the top and a list of conflict names and their relationship to the client below. Then, individual cards are created for each of the conflict names with the client’s name below. The client card and conflict cards are all placed in a card box in alphabetical order with all other client and conflict cards. This procedure is used for anyone who consults with the lawyer and communicates information which could be considered a confidence under Rules 1.7, 1.8 and 1.9. This applies to both clients who retain the lawyer and non-clients.

When a potential client first contacts the lawyer, someone in the office checks the potential client’s name and any conflict names given by client against those names in the index card system. If a name is found, the lawyer can analyze the potential conflict and make a decision about representing the potential client before even scheduling an appointment for an initial consultation. If this check is done early enough, the lawyer is in a position to refuse to consult with the potential client.

A ledger normally is kept adjacent to the file cards and all completed conflicts checks are documented there in hand-written form.

Setting Up a New Conflict “Database” Entry

Whenever a new file is opened and a new attorney-client relationship established, there is an immediate need to set up the conflict information for that client. This is also true each time new parties enter litigation. In a larger firm, it is critical that this be done quickly as the other lawyers may be contacted by parties with opposing interests.

Whether this is done on paper or digitally, this data entry must include the following information:

Name: (Last name, then first name and middle name of the person)

Date: (Date when the record was created)

File Name: (The name of the client or file)

File Number: (The number of the office file if applicable)

Attorney: (The lawyer assigned to the file)

Relationship: (Client, opposing party, witness or other)

Relationship Details:(A brief statement of the situation in case the card is consulted after the file has been destroyed.)

Prior names - As noted previously one cannot perform a completely reliable conflict check without ascertaining previous names of the person or business entity. This brings up one of the drawbacks to a paper index card system. If another name is found, an additional index card must be created for that name. That card can either contain all of the information contained on the primary card or make reference to it (e.g. “Mary Williams is the maiden name of Mary Smith. See conflict card for Mary Smith created 10/09/06.”)

In addition to clients, witnesses and opposing parties, one-time office consultations should be documented in the conflict system as well. A failure to enter these consultations in the conflict system can come back to haunt the lawyer. Suppose a husband contemplates dissolution of his marriage and consults the lawyer. During the consultation, the husband discloses confidential information. The husband then decides not to proceed with the dissolution. Two years later the wife comes to the lawyer seeking dissolution. If the lawyer accepts the wife as a client, the lawyer will have a conflict of interest. This could happen easily if the lawyer forgot about the consultation with the husband and did not maintain a record of consultations in the conflict system.

The above example also illustrates why conflicts systems should be treated with the highest degree of confidentiality.

Using the System

As previously noted, it is imperative that this system be committed to writing and that every employee is provided a copy even if they will not be involved in the checking. Illness or other emergencies may force anyone in the office to do conflicts checking. Conflicts should be checked three times. First, check for conflicts when a potential client first contacts the office prior to the initial interview. A preliminary check of the potential client’s name allows you to decline further discussion. Make a second, more thorough check during or immediately after the interview. After talking with the potential client you will then have the names of others connected with the case. And, third, check the conflict system whenever a new party enters the case.

Assign responsibility for conflict checking at each of the three key junctures and establish a method for recording that a check was completed. A client intake sheet or specific conflict check request forms are possible ways for requesting this. Always show the names that were checked, the date and who did the check. The responsible “checker” should either sign or initial.

If a name is found in the conflict system, the lawyer should be notified immediately. The more quickly the lawyer is aware of the new client’s relationship to a current or past case, the better the lawyer can make a decision to decline representation or make proper disclosure.

Another problem with index card-based systems is that they are vulnerable to the cards disappearing. If a card is removed and misplaced, there is no “back-up” and the system has been defeated as to that person. A major disaster such as a fire could result in the entire system being destroyed forever. Manual duplication of cards is a huge extra outlay of labor over time. Photocopying all of the cards is a significant expense. In the past, some vendors sold card sets, where duplicate cards are made from the same impression, but these require typewriters or hand lettering.

Index card systems may be good for beginning lawyers who are concerned about expense and simplicity, but eventually transition will need to be made to a computerized system, in this writer’s opinion. The main problem with a paper-based system is that it is both time consuming to maintain and time- consuming to utilize.

Many larger firms still regularly circulate conflict memos with a list of the names of new or potential clients. All the lawyers are required to review and initial these. There is certainly nothing wrong with this practice as a secondary safeguard, but it does not protect against a lawyer failing to remember the client’s name from a file closed years previously.

Dedicated Computerized Conflict Management Systems

There are some conflict checking systems that function independently of the other applications on your computer system. One such product is seaBill’s Conflict Checker www.seabill.com/cc.html. It retails at $399 with an additional $400 to upgrade to the 10-simultaneous- user-network version.

A less expensive product is RTG Conflicts www.rtgsoftware.com. It costs $95 for the stand-alone version, with the network version costing an additional $25 for each user license.

LegalSoftwareSystems.com offers a stand-alone conflict of interest checking software package for the small firm. It comes with a free evaluation opportunity. The evaluation package is fully functional, but only allows a maximum of 100 total clients, matters and other parties in the database. Once you reach that maximum limit the software will become disabled after 30 additional uses. Their stand-alone package retails for $349 for single user version and $599 for the multi-user version. Both versions are network enabled. Although this product is sold as a stand-alone solution, the primary focus of this company is integrated management solutions for law firms.

Unfortunately, I have not had an opportunity to personally review any of these products.

You can make a good logical argument in favor of either the stand-alone software application or the integrated with case management software approach. Generally speaking, the law office market has favored the latter.

I have to note that I strongly favor the latter approach as well. Integrated practice management packages do lots of different things. There is a significant benefit with operating one software package that does the work of several. Matters like training and upgrading are much more simply handled.

Practice Management Software Solutions

Most law firms in Oklahoma that utilize digital conflict checking procedures appear to use the conflict checking modules integrated within their overall practice management system. But some do maintain a “homegrown” database either designed with off-the-shelf database programs like Access or by using lists or tables created by and stored in their word processing software

Fully integrated practice management systems incorporate calendaring, file note-taking, contemporaneous time-recording contact management and many other functions. These programs are still making inroads into offices across the country with an increasing number of law firms adopting this approach. All of them will have some ability to do name searches and other conflict checks. Some of them have fairly good conflict checking processes while others are still being developed.

Space limitations do not permit coverage of all of these applications here. Readers are directed to the Fredric G. Levin College of Law of the University of Florida’s great resource about computerized case management systems online at www.law.ufl.edu/lti/CaseManagement.

Suffice it to say that there are certainly productivity benefits from being able to perform your conflict check within the same application where you do your calendaring, time recording and contact management. Your firm’s practice-management software system should become the focal point of information management activities about client files if properly implemented. It is only natural to have conflict checking as a part of this package.

Every law firm, no matter what size, needs to implement practice management software. Using the application’s conflict checking solution is just one of the benefits the law firm will receive.

“Do It Yourself” Software Applications

Many law firms have developed their own conflict management software system.

Some have utilized contact management databases. These types of programs, which are typically designed for sales professionals, are set up to record contact information and names, along with customized notes made by the user.

Other firms have paid for custom-developed databases in products like Access. The downside to these approaches is the expense in initial development, the specialized training required for staff and the expense to revise the database when the functionality is desired.

Nevertheless, firms who have adopted this approach seem very well satisfied with their result. The use of a stand-alone database makes it more likely that non-client information like witnesses and one-time office consultations will be included. In particular, it is sometimes hard to account for one-time consultations within the practice management software system.

There are some lawyers who do not wish to add another software application to those already used by the firm, but who nevertheless appreciate that paper systems have significant limitations. Many of these lawyers fall back on their trusty word processing software. In fact modern word processors have some powerful features hidden “under the hood.”

A lawyer who is willing to spend the time (or direct staff to spend the time) to learn about all of the features of tables within word processing software will soon learn that a table can accomplish most of the goals of the firm. In fact, designing a table within a word processor to serve as your conflict management system will incorporate many of the steps used in the file card set and ledger system described at the beginning of this article.

Having all of the information contained in a table that is easily searchable will speed conflict checks. Designing the table to display the entries automatically in alphabetical order by last name will allow even the most technophobic attorney to make use of the tool. However, over the course of a lawyer’s career, this document could quickly become very large and strain system resources. To make sure that this document does not become so large that it regularly crashes, it is best to create a new document every one to two or five years, depending on the number of files opened each year and the number of conflict entries made.

The lawyer who wishes to review the conflicts manually may find that they have to open and review several documents with lists or tables. But the small-firm lawyer might get by with only two such conflict documents per decade.

Even if a new “table of conflicts” was created each year and stored in a separate word processing document, there are many available tools that will index and quickly search all of these documents at once. The search tool contained within Windows XP is not generally recommended for this task. It is too slow compared with more recent technology and many have expressed concern about the accuracy of its results. However, free desktop search tools like X-1, Copernic and Google Desktop Search can index and quickly search hundreds of documents. Quickly searching a few dozen conflict tables contained in their own folder would be a snap using any of these tools.

Conclusion

Developing “bulletproof” conflicts checking systems is a necessary, if not particularly exciting, function of good law firm management. Hopefully this article has given everyone some ideas on how to design or improve their conflict checking system. While this may seem to be trivial or routine to many outside of the legal profession, one cannot overstate the possible negative consequences of learning that one has a direct conflict at a critical stage in the representation of the client.

Author’s note: Two forms related to conflict management have been created and are available for download. The forms, titled “Sample Request for Conflict Search Form” and “Types of Names to be Added to Conflict List” may be located on the OBA Web site at www.okbar.org/members/map/articles/conflict%20check.pdf.

Conflict Checking Systems from A to Z
Published 77 OBJ 3107 (Nov. 4, 2006)