What’s Your ColLATERAL?

Kate Gould, Esq.
February 27, 2024

Reading time: 6 minutes

When your firm is looking to add a lateral attorney, you need the security of knowing who you are hiring and what they are bringing to the table. Like any good lender, conducting thorough due diligence is key to understanding a potential hire’s background and assessing the book of business they propose moving to your firm. While a prospective candidate might look great on paper and interview well, it is crucial to properly vet them to ensure their arrival does not prompt a legal malpractice claim or result in unintended financial losses for the firm.

The Lateral Market

Hiring lateral attorneys, rather than bringing on new associates who require extensive training, can prove to be profitable and a great way to add the legal talent you need to serve your client base or develop a practice area. And attorneys, like many professionals these days, are on the move. The days of an attorney starting as an associate and retiring from the same firm are long gone.

According to a recent Thomson Reuters report, nearly 25% of large law firm associates left their firms in 2021. While recent studies showed a slight dip in lateral hiring in 2023, certain practice areas maintained consistent hiring or modestly increased in the second half of 2023. According to Lateral Link, recruiting for Labor & Employment attorneys remains active. There is also a demand for data privacy and cybersecurity attorneys, along with a surge in hiring IP litigation associates. Litigation associates looking to make a move also highly sought after as litigation is typically less affected by any corporate activity slowdown.

Another interesting trend in 2023 was group lateral moves. Recruiters found that large group moves were driven by the star rainmakers leading the groups who highly encouraged the group move with them. For firms wanting to grow a practice area or establish their presence in a certain geographic region, large group lateral moves can be profitable for the firm and incoming attorneys.

Whether your firm is looking to absorb an entire practice group or just add another attorney to a solo office, the risks of hiring lateral attorneys remain the same and require the necessary research and time to vet potential hires.

Risky Business

With an applicant pool full of strong potential candidates, what are the risks of bringing on a new lawyer? According to the Ames & Gough 2022 legal malpractice survey, conflicts of interest continue to be the most significant cause of malpractice claims largely due to the inappropriate handling of lateral hires. Eileen Garczynski, senior vice president and partner at Ames & Gough, states “…[T]here are no shortcuts for addressing conflicts; firms should be proactive in their efforts to anticipate, avoid and manage potential conflicts, including implementing sound procedures for recruiting, interviewing, engaging, and training lateral hires; flagging any issues, and communicating effectively – both internally and with clients.”

Any lateral move must start with a conflict check by the new firm. The ABA Model Rules governing concurrent conflicts and former clients are both at play when examining any potential conflicts as you consider a new hire. Rule 1.7 governs concurrent conflicts. A concurrent conflict can arise if the prospective new attorney represents a client who is adverse to a client of the firm. These circumstances also implicate Rule 1.10, the general rule that protects client confidentiality by limiting a law firm’s ability to represent a client in matters when a lawyer within the firm (or potentially part of the firm) is individually disqualified from representing a client. A firm may have no choice but to pass on the potential hire if the a conflict would disqualify the firm from representing a long-term client with a significant financial impact on the firm’s bottom line.

Rule 1.9 concerns the lawyer’s duty to former clients. The Rule prohibits the lawyer from representing a client “in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client whose interests are materially adverse to that person.” This is because that lawyer would have acquired confidential information protected by Rules 1.6 and 1.9(c) that is material to the matter (unless the former client gives informed consent). As with any conflict check concerning past clients, whether the matter is the “same or substantially related” must be analyzed.

Aside from the conflict issues, hiring a lateral attorney can also result in increased costs to the firm if they do not stay as promised or fail to deliver the business they anticipated bringing. Nearly half of recently surveyed firms reported that their laterals underperform when it comes to bringing their stated book of business which can result in yet another move and negative financial impact to the firm. While lateral attorneys can be one way to grow your firm, hiring laterals is not without risk and, quite frankly, doesn’t always have the financial benefit you may have anticipated.

Best Practices

Notwithstanding the risks, it is possible to strengthen your firm with lateral hires while avoiding the potential pitfalls. Several Am Law 200 firms have hired new talent leaders or created new roles within the firm for the purpose of hiring and overseeing talent. The looming retirement of many baby boomers and what has been described as new lawyers’ “get-in, get-out” approach to Big Law when starting their careers has arguably created a need for these roles as law firms adjust how they will handle recruiting and talent retention.

However, if your firm size doesn’t require this level of internal oversight, there are some best practices you can implement to successfully hire lateral attorneys while avoiding a potential malpractice claim:

Do your due diligence – The value of fully vetting each applicant before offering them a position cannot be overstated. As firms vie for the seemingly best candidates, many are failing to actually validate the candidate’s practice areas and professional relationships, especially as they relate to their purported book of business. Interestingly, law firms are reportedly less interested in a candidate’s personal background which may reveal certain professional conduct issues, questionable social media content, or even tax liens. Make sure you review their social media accounts and look for any personal or professional red flags. Take the necessary time and steps to thoroughly research a potential candidate to fill the need at your firm.

Review any claims – Depending on who you may be hiring, inquire about the attorney’s claim history and their firm’s insurance coverage. For example, if you are considering adding a solo practitioner to your firm, ensure that any claims related to their former firm have been properly reported to their insurer.

Examine your track record – As you interview potential candidates, consider your firm’s track record for successful lateral hires. Have your firm’s prior new hires successfully assimilated into the firm and met certain benchmark requirements, such a hourly or financial goals? Who you hired – or perhaps “how” you hired them – may inform your process this time around.

Prioritize your needs – While it is easy to focus on simply filling a position to satisfy your firm’s immediate needs, consider your firm’s growth strategy, long-term plans, and the client-centered services you committed to providing. By keeping your firm’s goals in mind, it may be easier to pass on a candidate who isn’t the best fit in favor of a candidate that better suits the firm in the long run.

Consider the cultural fit – There is simply no substitute for the gut feeling you and your partners may have about a candidate. Although you should always check yourself against each other’s feedback, if the candidate has the “it factor” in terms of fitting in with your firm culture and potentially adding to your bottom line, you have likely found the lateral hire that may be a longtime member of the firm.

Adding a new attorney (or attorneys) to your firm can be stressful. From sorting through resumes to the interview process to seemingly endless conflicts checks, it takes time away from your practice. However, a proper hiring protocol is critical to ensure you “get what you paid for.” With the right procedures in place (and a little patience), you will be well-equipped to hire the best lateral candidate for your firm. With these tips in mind, you can bank on it.

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Information provided by AttPro Ally is not intended as legal advice. This publication provides best practices for use in connection with general circumstances and ordinarily does not address specific situations. Specific situations should be discussed with legal counsel licensed in the appropriate jurisdiction. By publishing practice and risk prevention tips, Attorney Protective neither implies nor provides any guarantee that claims can be prevented by the use of the suggested practices. Though the contents of AttPro Ally have been carefully researched, Attorney Protective makes no warranty as to its accuracy, applicability, or timeliness. Anyone wishing to reproduce any part of the AttPro Ally content must request permission from Attorney Protective by calling 877-728-8776 or sending an email to [email protected].

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