How to Perform a Conflict Check: A Step-by-Step Guide for Law Firms

If one thing will get a solicitor into trouble, it’s acting for two or more clients in a conflict of interest situation. A conflict of interest check is essential to the client onboarding process. But what is a conflict of interest?

What is a conflict of interest?

A general definition of a conflict of interest concerning a law firm is:

 When a solicitor’s duty to act in their client’s best interest is compromised or appears compromised due to their personal interests, relationships, or duties to another client.

In simple terms, do not act for more than one client in a transaction or case where their interests might conflict or a conflict of interest exists.

Note: Don’t risk being “that lawyer” caught in conflicts of interest. Leverage Clio Manage, the leading legal practice management software, to effectively manage and track all relevant matters and client information to stay on top of conflicts. Schedule a free Clio demo today and get a personalised tour of how it can help keep your firm compliant and organised.

Head off potential conflict of interest problems at the pass

Conduct a conflict check at the initial data capture point when taking on new clients or matters. Ensure you identify all entities involved to maintain transparency and adhere to best practices. Legal Client Management Software makes this process easy, allowing you to quickly search your client and contact database for any conflicts of interest. By doing this, you will avoid getting into difficulties in the first place. The SRA Code of Conduct has a specific section on conflict of interest, including some examples.

Conflicts of interest in business and healthcare settings

Conflicts can occur in any business setting, often involving competing interests that may affect decision-making. For example, there can always be tension and potential conflicts of interest between the shareholders and directors of private and public limited companies. These conflicts can arise around remuneration packages for the company executives against the returns to the shareholders by way of dividends. UK Research and Innovation has provided further examples of conflict of interest in business.

Types of conflict of interest

Conflicts of interest can fall into different categories, including financial, non-financial and personal interest conflicts.

Financial conflicts and financial gain

• Having a business deal with a client, owning part of their business, or holding a financial interest that goes against the client’s best interests.
• Giving a client financial help during a legal case or covering costs for clients who can’t afford them.
• Negotiating settlements or plea deals for several clients at once, which could cause conflicts.
• Allowing someone else to pay the client’s legal fees unless the client agrees, the lawyer stays impartial and protects the client’s privacy.
• Recommending financial products to clients and receiving hidden commissions, which creates a conflict between the lawyer’s financial gain and the client’s best interests.

Non-financial conflicts

• Representing two clients with conflicting interests (e.g. co-defendants in a criminal case who might try to incriminate each other).
• Taking on a client when you cannot fully represent them due to obligations to another current, former, or third party, or if doing so would create a professional conflict.
• Representing the opposing party in the same matter after ceasing to act for a client.
• Acting for someone when your previous firm represented the other side, and you have confidential knowledge about the case.
• Using information obtained from a client to cause harm to that client.
• Entering an agreement that limits your future professional responsibility or liability for your services.

Recognising a conflict when personal relationships or duties to another client may affect your professional judgement.

Personal interest conflicts

• Soliciting a gift, including one in a will, from a client.
• Securing the movie or book rights to a client’s story before the case ends and fees are fully paid.
• Settling a professional misconduct or service claim with someone who doesn’t have a lawyer unless they’re given written advice and the chance to seek separate legal representation.
• Having financial connections with a client that could affect your professional judgement and decisions.

Identifying and disclosing conflicts of interest

It is always best to discover a conflict or potential conflict of interest early in a case. Make such disclosures promptly to ensure transparency and maintain credibility. Much will also depend on the type of case. Do not assume there will be no conflict of interest before checking.

Identifying a conflict of interest

When you open a new client record or if you are asked to act for an existing client, identify the other parties or entities who are or are likely to be involved. If you use a Practice or Case Management system, like Clio Manage, there is a built-in search function at the top of the practice management suite. If you’ve entered the necessary details in the client and matter fields and added related contacts for opposing and other parties, a few characters in the search should return relevant results.

You must also ask yourself if you or your firm have any potential interest in the case. You will, of course, have an interest in generating fees. Other than that, is there any other interest you might have that could conflict with the client’s interest?

Disclosing a conflict of interest

As soon as you discover a conflict or potential conflict when taking on a new client, if that client’s interests conflict with that of an existing client, graciously decline to act for the new client. Before you immediately decline to act, you should find out if your existing clients need you to represent their interests in the same case. If they do, explain to the potential new client why you cannot represent them because you have an existing client of the firm whose interest will conflict with their interest.

You should also explain that it is essential that, as a client of your firm, they receive the best independent legal advice available, and that might be compromised because you are already acting for a client in this matter.

This is a simple example of a conflict arising when a new client seeks to engage your services. There are many other instances where a conflict of interest arises after you have taken the client on board.

Ethical and legal considerations of a perceived conflict of interest

From an ethical point of view, solicitors are obligated to represent their clients to the best of their ability, especially when a conflict of interest exists. You cannot do that if you are also acting for someone else in the same case whose interests do not match. Should you fail to disclose, either client could challenge you and recommend that one or both clients seek separate representation. This can lead to complaints to your professional body and the regulators who might sanction you for acting in a conflict of interest situation.

You must also consider what might happen if one client suffers losses when a potential conflict of interest manifests. Irrespective of the cause, you and your law firm may be subject to a possible claim from the client on the losing side!

Managing and mitigating conflicts of interest

You need a clear strategy to manage conflicts of interest, including handling competing interests in different cases. Start by accurately recording data in your practice management system, which can compare information and alert you to potential conflicts.

Once your strategy is set, create organisational policies to support it. Properly recording client data makes it easier to identify and manage conflicts. Your data input policy should specify what information to include in your system.

Timing is crucial—enter new leads or clients early and run conflict checks right away. Regularly update client data and re-run checks as needed, such as after name changes, which might reveal conflicts.

Using a practice management system like Clio helps track all relevant matters and client information, ensuring thorough conflict checks. Try Clio for free today.

If you find a conflict, fully disclose it to the client and follow professional conduct rules when declining or withdrawing representation. Regular staff training and compliance checks are also key to reducing conflict risks.

Best practices for preventing conflicts of Interest

The best practice for preventing a conflict of interest is a three-stage process:

Conduct conflict of interest checking: Use an effective practice management system to record and manage all client information. Conduct conflict of interest checking and make such disclosures promptly to maintain transparency. Deal immediately with any potential conflict of interest issues that are flagged up.

Establish effective policies and procedures and effective training and awareness processes: Include training in new staff induction and regularly run refresher conflict of interest training.

Conduct reviews, audits, and monitor activity. This will help ensure compliance with the policy and identify solicitors, fee earners, and support staff who need refresher training.

Creating a conflict check process at your law firm

The starting point for a law firm conflict check is to maintain a database of all relevant contacts. This means former clients, opposing parties, etc. Here’s a list of things you should track for accurate conflict checking:

• Full legal name;
• Maiden and married names;
• Nickname(s);
• Date of birth;
• Address;
• Phone;

For businesses, you’ll want to include:

• Business name;
• Officers and directors;
• Partners;
• Trade names;
• Place of incorporation

Not all of this information will change over time. If you come across a close match, at least you can cross-reference birth dates, maiden names, etc. that require further investigation.

A conflict of interest check should be done before a consult is scheduled. If you conduct a lot of phone consults, whomever at your law firm first answers the phone should run the above information through your database. You’ll want to check the potential client and opposing party for close matches, misspellings (John, Jon, Johnathan, Jonathan), and former names. Once the check is complete, record the results of the check, including the date and time the check was done.

If a conflict is flagged, or even suspected, the person answering the phone can schedule a follow-up call with the attorney to discuss the matter. Indicate that the firm has time to investigate (and to evaluate whether the case is worth dealing with conflict waivers).

How long does a conflict check take?

The time it takes to properly conduct a thorough conflict check varies depending on a number of factors such as the complexity and comprehensiveness of your law firm’s database and the specific conflict-checking system you use. Using a manual process, a conflict check could take hours. With the help of tools and technology, however, conflict checks can be completed in minutes or even seconds (more on this later).

Using technology to help with law firm conflict checks

Ttechnology can help you maintain a database of contacts and conduct a solicitor conflict check. Here are a few tools that can help with the conflict-checking process.

Spreadsheets

The most common method, I’d suspect, and the one a few firms I’ve worked with use is an Excel spreadsheet filled with contacts. Things such as name, address, phone, date of birth, relationship to the firm, former names, etc. are recorded. Do a simple “CTRL+F” or “CMD+F” and start typing in variants of names, nicknames, etc. Make a note in the file or intake notes that a conflict check was run, who ran it, and what date and time it was completed. 

The biggest downside of this is that Excel can bog down hard when you have a few solicitors with hundreds of former clients, and there’s tons of room for human error.

Practice management solutions

For Clio Manage customers, there is a built-in search function at the top of the practice management suite. So long as you have entered the relevant information into the client and matter fields, and created related contacts for opposing and other parties, searches of just a few characters should pull up relevant results. View the step-by-step process of using Clio to run conflict checks here.

Also, if you’re on Clio’s Premium and Suite plans, you’ll be able to search for text within documents and their meta descriptions, adding extra peace of mind.

Conflict check software

You can also use tech tools that are specifically designed to make the conflict-check process faster, easier, and more accurate.

How can conflict check software help you save time?

Legal conflict check software automates the process of cross-referencing clients and matter details against your database so that your firm can then easily address any potential areas of conflict that are detected. By automatically taking care of this time-consuming part of the process and helping to identify possible conflicts of interest, conflict check software speeds up the overall process while reducing the chance of manual error.

Consequences of unresolved conflicts of interest

There may be legal, professional and financial consequences for solicitors acting in a possible conflict of interest situation.

Legal consequences can result in the client raising proceedings against the solicitor and the law firm losses incurred due to acting in a conflict of interest situation. A very public conflict of interest case cost a Scottish law firm £19m to settle. The solicitor representing the Pursuer (Plaintiff) also advised the solicitors acting for the company who had entered into an investment and share purchase agreement with the Pursuer and his company. The Pursuer successfully settled the conflict of interest claim out of court in 2018. 

Solicitors can also find themselves before the Solicitors Discipline Tribunal for acting in a conflict of interest situation. One such case resulted in the solicitor having conditions imposed should he return to practice. These included prohibitions against:

• being an owner or partner in a law firm
• having a compliance role
• holding client money
• being a signatory on any client account
• working as a solicitor other than in employment approved by the SRA

The solicitor was also fined £12,000.

In addition to legal, professional, and financial jeopardy, you can also cause reputational damage to the solicitor and the law firm. Few clients wish to instruct a solicitor when they’ve been found wanting, especially in a conflict of interest situation.

Final thoughts on conflict of interest

Conflicts of interest can arise in various settings and can have significant consequences. It is essential to identify and manage potential conflicts of interest to maintain ethical standards, prevent legal liability, and ensure that all parties involved make decisions in the best interests. By understanding the different types of conflicts of interest and how they can arise, individuals and organisations can take proactive steps to prevent and manage them. This includes disclosing potential conflicts, establishing robust policies and procedures for managing conflicts, and ensuring that decisions are made with integrity and transparency. Managing conflicts of interest is crucial for maintaining trust and credibility in personal and professional relationships.

Law firm conflict checking comes down to one thing

At the heart of it, law firm conflict-checking is about consistency. Whether you use a dedicated tool, spreadsheet, or even binders, make sure to update your database regularly. Be thorough with your searches, and keep a record of any conflict checking you do for each case. Your practice—and your clients—will thank you.

And of course, don’t hesitate to make it easier on yourself by putting everything into a cloud-based legal practice management solution like Clio. Book a demo today to see it in action.

What is a conflict check in a law firm?

Conflict checks identify and assess possible conflicts of interest before a law firm takes on a new client or matter. This ensures the firm doesn’t represent a client whose interests adversely impact another client that the firm already represents.

How does a law firm check for conflict of interests?

When conducting a conflict check, law firms review potential client’s information, including the parties involved, the nature of the matter, and any other relevant details. Then, they compare this information to their existing client and matters list.

Why is it important to perform a conflict check in a law firm?

Conducting a conflict check is an important part of ethical practice for lawyers. It ensures that the lawyer or firm is not placed in a position where its loyalty to one client could be compromised by its representation of another client.

When does a conflict of interest occur for an employee?

A conflict of interest occurs when an individual’s personal interests – family, friendships, financial, or social factors – could compromise his or her judgment, decisions, or actions in the workplace.

What is a conflict of interest in UK law?

In UK law, a conflict of interest is when a solicitor’s ability to act independently and in the best interest of a client is compromised by competing duties, personal interests, or relationships. The Solicitors Regulation Authority (SRA) Code of Conduct requires solicitors to conduct thorough checks during client onboarding to avoid such conflicts.

How to identify a conflict of interest?

Identifying a conflict involves conducting a conflict check at the initial client intake, ensuring all parties and entities are documented clearly. Using tools like practice management software, such as Clio, helps quickly search client records for any conflicts and maintains transparency, minimising risks of potential conflicts.

We published this blog post in October 2024. Last updated: November 20, 2024.

Categorized in: Business