6 Risk Factors That Leave BigLaw Open To Suits From Within

Law360 | February 7, 2020

With the list of BigLaw heavyweights that have been sued by their own attorneys growing precipitously in recent years, firms that want to avoid being caught up in similar legal battles should be ready to address problems before they lead to litigation, experts say.

One area that can create legal risk for firms but that often goes ignored or unchecked is lawyers engaging in what can be perceived as verbal harassment, even if it isn’t attached to a category like race or gender that is protected under civil rights laws.

Michael Ellenhorn, the founder and CEO of Decipher, a competitive intelligence firm that works with law firms, said one thing he has found in conducting extensive due diligence investigations on prospective lateral partner hires is a marked rise in reports of alleged bullying.

“One of the things we’re seeing on the behavior side is a spike in people reporting episodes of bullying,” he said. “Firms have to create cultures where their internal stakeholders — whether they be associates or whether they be professional staff — feel like they are in a supportive environment where they … can come forward with concerns about how they’re being treated by other people in the firm.”

Beyond those hot-button issues, however, law firms also remain at risk of legal action stemming from substandard legal work or financial impropriety.

While instances of outright physical abuse or harassment between fellow lawyers are clear-cut examples of behavior that can be the basis for legal action, there are plenty of other forms of questionable behavior that can be easily overlooked but are no less problematic, including actions that stem from financial troubles a lawyer may be experiencing.

Those financial problems can come from a multitude of places — outside business interests or investments that don’t work out, costly divorces, lingering debt and overspending, to name a few — and can lead lawyers to make “poor choices,” like pumping up travel expense reimbursements, billing fraudulently or mishandling client matters, according to Ellenhorn.

That can ultimately lead to a client suing the firm for a lawyer’s misbehavior, or a claim by lawyers and professional staff against the firm itself “as in a whistleblower situation or a retaliation claim situation,” Ellenhorn said.

“Lawyers that are under financial strain sometimes will make poor choices and sometimes those poor choices will end up reverberating back onto the firm,” Ellenhorn said. “It can start with the poor choice or malfeasance of a lawyer who is under financial strain and it can end up with a claim against the firm.”

So how can firms assess whether their lawyers are facing financial issues that impact their work?

Noticing if a lawyer has tax lien issues or if there are unusual spikes in expenses and reimbursements is a start, according to Ellenhorn.

“But those are the kind of things [that] if you have a culture that’s supportive and a culture that takes these types of issues seriously … [and] if you’re attuned to those potential red flags, you’ll catch a lot of this stuff before it evolves into a claim,” he said.

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