The question arises whether lawyers can effectively and ethically represent opposite types of clients — for example, insurance carriers and insurance coverage plaintiffs. The ABA’s Rule of Professional Conduct 1.7 addresses this. On the one hand, the rule sensibly says that a lawyer cannot serve two parties who are directly adverse in the same matter; it also bars representation “when there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.” Yet the rule also says that a lawyer may represent clients whose interests are opposite if the lawyer “will be able to provide competent and diligent representation to each affected client.”
Given that this stipulation opens the door to representing opposite types of clients, the consideration for the lawyer becomes a practical one. In our analogy above, would an insurance carrier get upset if it knew that their coverage defense lawyer was also representing plaintiffs in coverage matters against other carriers? If so, the plaintiff business may not be worth it. However, a plaintiff lawyer may well find substantial advantages in undertaking defense work. Such work would even out cash flow and keep the lawyer from being dependent on one type of client. The example of the Heller Ehrman firm, which failed several years ago, is instructive: The firm primarily handled litigation defense, and when a number of large cases suddenly settled there was no new business in the pipeline to replace it.
There is also the consideration of whether certain types of work in opposition will create financial problems for the firm. Plaintiff cases are often taken on a contingency basis, for example, while defense work is typically done at an hourly rate. Corporate defense firms that enter into contingency arrangements have found that they face increased problems from their use. Some of these problems crop up while the contingency matter is open and there must be compensation for lawyers who bring no money into the firm and, in fact, are responsible for cash outflow in the form of their compensation and expenses advanced to sustain the lawsuit. Then, if the firm is successful and the contingency money flows in, conflicts arise over who gets what. How much should the lawyers working on the matter receive? Isn’t the matter the “property” of the firm? Didn’t the firm advance the costs, not the lawyers? What is fair?
Such issues show that any decision to take on clients from opposing perspectives should be well thought out. Firms that consider all business to be good business, without regard to thinking through the consequences, may find that taking fees from opposing sides creates more problems than it’s worth. A better alternative would be to diversify the firm’s practice to encompass several different but still related areas of practice emphasis. A personal injury lawyer, whether serving plaintiffs or insurers, might consider diversifying into such areas as construction law or representing architects or realtors in professional services disputes. The techniques of discovery and trial advocacy would be the same, the firm’s business base would be diversified, and conflicts of interest would not be a problem. The issue is not just more business — it’s getting the right business as a better foundation for firm profitability.
Edward Poll, J.D., M.B.A., CMC, is a law practice management thought leader and contributor to this publication. His website is at www.lawbiz.com.