American Bar Association Center for Professional Responsibility. Standing Committee on Professionalism An Integrated Law Firm Loss Prevention Matrix 2OO6 Volume 17 Peter J. Winders Issue Number of who flees from the noise the fear Done right, they are complementary and can pro- shall fall into the pit; and he who comes vide layers of protection. The components can be up out of the midst of the pit shall be classified as follows: 2 caught in the snare." Isaiah 24.'18, pla- Gatekeeping Systems These are systems that giarized in Jeremiah 48.'44 can be enforced by strict application of procedures As if a man fled f•"om a lion, and met a bear," as part of a process that everyone has to do. An escaped into the house.., and a snake bit him: example is the Business Intake System: to open Amos 5:19 and record time to and bill a matter, certain steps have to be accomplished, and the firm can protect A combination of circumstances the creates itself by adding steps with loss prevention value. serious professional liability claim; and a combi- Because everyone wants to record time and bill, nation of measures can protect against it. The guy this is an occasion to impose other tests before that in Amos may have been negligent in provoking the can be accomplished. Another example is the wildlife, but with better pest control, he would Lateral Hire procedure, which similarly may have have been okay. imposed it certain checks and requirements on ka•a• •ka•s haa•sv ka•s providing loss prevention information and requir- ing loss prevention or risk decisions. If mechani- Almost all ve• large claims against law fi•s are required before something can be cal steps in the past 25 years have involved a convergence accomplished, that also provides an opportunity of several of a group of specific factors listed in the for application of the additional judgment of a par- table below. The large claim tends to be a "perfect ticular person or group. sto•" situation where not just one thing goes wrong but several things coincide to make the sit- A number of things can be guarded against at uation worse. This obse•ation was tree of the sav- the gate by a Business Intake System that requires ings and loan scandal cases, the recent co,orate signoff by one or more persons of trusted judg- accounting collapses, the "dot corn" cases, and the ment other than the originating lawyer: aiding and abetting claims in which the plaintiff Unworthy By undesirable clients. or contends that the defendant's transaction la•er on requiring signoff from a person of trusted a pa•icipant various theories became in defen- judgment other than the originating lawyer, dant's schemes. It is rare that a really big claim and by providing client background informa- involves only one or •o of these factors. Some of tion through appropriate research to aid such these factors allow problems in the door, while judgment, the unwitting acceptance of a client other factors allow problems to grow undetected or with a history of changing lawyers, fraudulent unaddressed until they cannot be contained. activities, or other undesirable traits, is dimin- ished. COMPREHENSIVE LOSS PREVENTION Dabbling. If the business intake review The toss prevention st•c•re for a law fi• includes the leader of the department in policies, involves a combination of elements whose specialty the matter falls (not the head programs, systems and aspects of fi• cul•re. of the originating lawyer's primary depart- Peter J. Winders is General Counsel, Cadl0n Fields, Tampa, Florida, Continued on page 4
Loss Prevention, fi'om page 1 Another example is a policy on Audit Letter Responses. ment unless that is the nature of the matter) then prop- The policy may be clear that the firm does not give oral er staffing of the matter can be assured. Traps exist in updates to auditors, but it is possible to do so anyway. every practice area, and it is common for one special- Policies Against Bad Ideas As examples, firms should ist to underestimate the complexity of another special- have policies against investment with clients, against serv- The litigator cannot open ty. a patent matter without ing on the Bdard of a client, against insider trading. There the signoff of the head of the IP Practice Group. This can be requirements for seeking exceptions to some such can be guarded against at the gate. policies, but there is no true gatekeeping opportunity to Inadequate or inappropriate fees. Closely related, catch all of them before they arise. Some of these can be the appropriate fee agreement for an assignment is best uncovered by requiring a response annually to a question to determined by the group or department that specializes the lawyers about board memberships, often required for in the work. Approval by the group or department insurance applications. Perfect enforcement of policies head avoids the problems of disappointed expecta- such as this is hard. A typical young litigator will read and tions. This not only protects the firm's economics, it immediately forget a policy that prevents his acting as a protects against the temptation to neglect unprofitable a director without certain conditions and safe- trustee or work, and the increased risk such neglect can'ies with guards, because he cannot foresee that it applies to him. it. When a grateful client offers him the position several years later, he sees it as an honor, and thinking as litigators do Contlicts including positional or "blocking" con- about business matters, "How hard flicts. The basic conflicts issues arising from a stan- it be?" accepts can without thinking about checking policy. Education and re- dard data base search can be reviewed, which is vital. As important, the leader of the practice area in which education are required. the engagement falls is better positioned to know if a Policies and Systems to Assure Access and Reporting- positional conflict is implicated, or if the acceptance of These are important whether you can the business might interfere with appropriately call them systems not. or another more desirable engagement What happens when, despite the sentries, that is in process. the problem matter got through the gate The large claim tends to be a "perfect Inadequate engagement despite the fluttering red flags and the foul letters. Involving the right practice group smell, storm" situation or when the problems arose after leader helps that specific the matter was ah'eady in the door? There assure issues to that area of the law should be clear paths that allow peers, are properly addressed in associates, paralegals and secretaries to let the engage- appropriate people know if they observe an irregularity or ment letter. A signoff by the leader of that area pro- vides this safeguard. are worried about something. Many of the finn's staff members will be quite savvy (especially if the firm on Specific Products Policies Certain risks can be includes them in its education efforts). The policies managed by requiring that certain functions must be per- encouraging reporting might be called an Open Door poli- formed with safeguards. Examples are an Opinion Letter cy, an Ombuds Policy, a Safe Harbor Policy, or a combina- policy that requires approval by two lawyers, or by a tion but they should both encourage, and remove imped- department head, or by a member of a panel. This is an iments to reporting matters that may be ilnportant. If the important safeguard, but it is not always self-enfoi'cing. Ombuds Policy allows a secretary anonymously to report Unlike the Business Intake Policy where the lawyer wants that Lawyer X is not following the Opinion Policy, or is to obtain the account numbers that will allow him to bill showing signs of a substance abuse problem, or is invest- and record his time, but cannot get them without following ing with a client contrary to policy, the firm is way ahead. procedures, the lawyer who fire off wants to letter a The requirement to report claims or circumstances that answering a complex question off the top of his head can might conceivably result in claims to a designated person do it he has just violated policy and made a serious judg- as soon as possible should be crystal clear, and the report- The lawyer can get the firm in trouble by for- ment error. ing itself should be as painless as possible a means to getting to follow policy, and there is no gatekeeping oppor- marshal the firm's resources for damage control, not disci- tunity to assure he does not make that mistake. Some firms pline) Any decision about whether the existence of a prob- have an Opinion step in the Business Intake procedure, lem is a symptom of inadequate performance by an indi- asking if the engagement involves an Opinion of the firm, vidual lawyer must be separated from reporting. Reporting and if it does, triggering the review process from the out- a problem to the General Counsel should have a positive This will not catch the Opinion requests that often set. result immediate assistance in solving the problem arise during the course of the engagement, but it should or minimizing the damage. If there was misconduct on the catch those present at the outset and serve a frequent as part of the lawyer, that is a different problem that will be reminder of the policy. Education and enforcement are addressed later by management. required to assure that compliance with such safeguards. Education Programs A firm whose lawyer population 4 THE PROFESSIONAL LAWYER
Recommend
More recommend
