Avoiding the Bad Client Surprise

Nearly 20 percent of lateral partner candidates neglect to provide a comprehensive list of their clients to their prospective firms, according to Decipher Investigative Intelligence research. This means that law firms that rely on the lateral partner questionnaire (LPQ) alone take serious risks – reputational, financial and otherwise – of taking on radioactive representation.

Imagine learning that your new lateral partner had represented neo-Nazis?

Or Bernie Madoff.

Or Roman Polanski.

Now understand these are not hypotheticals: Each of these client engagements surfaced in Decipher lateral hire intelligence reports after the lateral candidate had failed to disclose them. And there are many more just like them.

Akin to the old saying that “it’s not the crime, it’s the cover-up,” it’s not necessarily that these representations are a red flag: It’s the fact that they were actively concealed.

To be sure, the Sixth Amendment provides all defendants the right to counsel; the American Bar Association Defense Function Standard states “all … qualified lawyers should stand ready to undertake the defense of an accused regardless of public hostility toward the accused or personal distaste for the offense charged or the person of the defendant.”

As members of the legal profession, we take seriously this duty; most law firms are no strangers to unpopular clients. But the representation of such clients, and the repercussions of that association, should be considered in advance with clear eyes and clear heads – not as inherited baggage from the “new guy.”

Indeed, the “bad client” can have many negative impacts on a firm. It can conflict you out of work you want to be doing. It can repel corporate clients mindful of their own reputations. And it can drive away attorneys and staff who find the professional association results in a values clash.

Consider Jones Day, who represented former President Donald Trump in a number of controversial attempts to challenge the outcome of the 2020 election. Protestors painted a mural outside one office that read “Jones Day, Hands Off Our Ballots.” Lawyers told The New York Times they were heckled on social media. In February, the firm was hacked by the Clop cybercriminal gang.

That’s tough enough to weather when it stems from a long-term client relationship; Jones Day has received more than $20 million in fees from Trump-affiliated groups since 2015, according to Fortune. It’s harder when the source of the bad press is a new, unproven and relatively unknown lateral partner.

How can law firms protect themselves from the bad client surprise?

One: Increase the timeframe on your LPQ.

Many firms ask for a three-year lookback at previous client representation. We do not believe this is sufficient; we recommend five years at least.

Two: Know your bright-lines.

If there are industries or types of clients you absolutely do not want – be specific. Articulate any prohibited clients clearly on the LPQ and discuss them early in the recruiting process.

Three: Take seriously the duty of candor.

As we shared previously, about 30 percent of the LPQs we see are incomplete – and far too many firms are unbothered by this. The manner in which lateral partner candidates complete their LPQs often reflects their character: If they are willing to be evasive or misleading about the clients they have represented, what else might they be less than forthright about?

Transparency is more important than ever in 2021; after COVID-19 struck, the “red flag rate” for candidates screened by Decipher jumped from 24 percent to 33 percent. In other words, one in three potential lateral hires carried significant potential risk: questionable legal skills, lackluster books of business, challenging personalities, high tax liens, bankruptcies, conflicts or unethical behavior, among others.

Any lack of transparency should be alarming when recruiting partners – individuals of whom a fiduciary duty is expected. If any questions on your LPQ are left blank, follow up and insist on an answer.

While these steps can help lower your risk, a comprehensive due diligence program will protect against the full range of red flags, significantly lowering risk and boosting ROI. Case in point: Of more than 250 partners recently vetted by Decipher, only 3 percent have moved again. The market second-mover rate for the same period: 33 percent.

Can we help you? Contact us today.

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