Principle: Service Providers should employ reasonable proactive measures to identify potential conflicts of interest, as defined and discussed below. In the event that an actual or potential conflict of interest is identified, Service Providers should disclose any such conflict and take immediate steps to resolve it in accordance with the Guidelines set forth below.
Corollary:Clients should furnish Service Providers with sufficient information at the commencement of each engagement to enable each Service Provider to identify potential conflicts of interest. If an actual or potential conflict of interest is identified and disclosed and the Client elects to proceed with the engagement, the Client should work in good faith with the Service Provider and other parties to facilitate a resolution to any such conflict in accordance with the Guidelines set forth below.
1. A conflict of interest may arise when an organization or individual is in possession of proprietary information from a current or former Client. It may also arise when an organization or individual has a financial stake in a process, software product, Service Provider, or staffing organization. The issue is whether an independent observer might reasonably question whether the advice given to a current or potential Client may be improperly influenced by the Service Provider’s financial interest or possession of such proprietary information.
2. To avoid potential conflicts of interest, Service Providers should maintain a conflicts checking system and divulge any interests that are relevant to the engagement at hand. A conflicts checking systems should include up-to-date information on each matter for which they have been engaged, including the Litigants, their legal representatives, and a description of the work performed, as well as matters for which employees of Service Providers have worked other than at the current Service Provider.
3. Prior to commencing any new engagement, a Service Provider should request, and the Client should provide, the caption information for the matter, the list of all legal counsel for all parties, and any other relevant information that will assist the Service Provider in identifying potential conflicts of interest.
4. Service Providers should process all available information regarding the parties and their legal representatives through their conflicts checking system in order to identify any conflicts of interest prior to commencing work on the matter. In the event that the Client requires services to immediately commence in order to meet a court imposed deadline, this checking should be done as soon as reasonably practical.
5. In the event a Service Provider identifies a conflict of interest, the Service provider has two courses of action: (a) turn down the proposed engagement, or (b) make timely disclosure to the appropriate parties.
6. Once a conflict of interest is identified and disclosed, the impacted parties should work together in a timely manner to determine if such a conflict can be mitigated.
7. Conflicts of interest that cannot reasonably be mitigated must be avoided.
8. If, following informed disclosure, all impacted parties determine in good faith that the identified conflicts can be mitigated, the impacted parties should agree on steps that will adequately memorialize the disclosure of the conflict and the steps taken to mitigate that conflict.
9. Service Providers should not proceed with an engagement where one or more conflicts have been identified until those conflicts have been resolved and the resolution is adequately memorialized to the satisfaction of all parties involved. In the event of a merger or acquisition involving two or more Service Providers, the Service Providers should take appropriate steps to ensure that the information in both of their respective conflicts checking systems is consulted at the start of a new engagement.
10. In the event of a merger or acquisition involving two or more Service Providers, the Service Providers should, within a reasonable period of time, identify conflicts of interest resulting from the merger or acquisition, and take prompt steps to disclose and mitigate any such conflicts.
11. In the event a Service Provider encounters unforeseen conflicts of interest during an engagement, the Service Provider should disclose the identified conflicts and attempt to mitigate such conflicts in accordance with the guidelines set forth above.
12. A Service Provider should implement appropriate procedures for establishing an ethical wall to screen out one or more employees, if required, to resolve a conflict.
13. Absent superseding contractual obligations, Service Providers should withdraw from an engagement to avoid a conflict of interest that cannot be otherwise resolved. Any withdrawal should be performed in such a manner as to reasonably avoid undue prejudice or disruption to the Client.
14. Service Providers should not divulge or reveal the substance of any communications between the Service Provider and any Client to any third party absent express written permission from that Client (or its authorized representative) or a valid order from a court of competent jurisdiction.
15. Service Providers should not release a Client’s ESI or other materials to any third party without the express written permission from the Client (or its authorized representative), or upon service of a valid order from a court of competent jurisdiction.
This Principle makes paramount the timely identification, disclosure, avoidance or mitigation of conflicts of interest between Service Providers and one or more Clients.
Defining “Conflicts of Interest”
In the context of this rule, Conflicts of Interest arise when a Service Provider has two or more duties that are in opposition to one another. Such duties may be personal or professional, contractual or fiduciary, formally prescribed by law or informally established by societal norms. Conflicts of Interest must be distinguished from the competing day to day obligations that arise in the context of business and personal relationships. Routine obligations resulting in competing priorities do not rise to the level of a Conflict of Interest and are not addressed in this Model Code. This Model Code is intended to address only the Conflicts of Interest which occur in connection with the establishment and performance of a business relationship between a Client and a Service Provider.
Conflicts of interest are classified as actual conflicts, potential conflicts and springing conflicts. Actual conflicts are those already in existence at the time a relationship commences. Potential conflicts are those that may be reasonably anticipated to occur sometime during the existence of a relationship but have not yet matured. Springing conflicts are those that did not exist and were not reasonably anticipated at the commencement of a relationship, but arise unexpectedly during the course of an engagement.
Special Issues Related to “Clients”
A Service Provider owes a duty to the Client. In the simplest terms the “Client” is any signatory party to an agreement with a Service Provider. In the electronic discovery services industry, engagements often include three parties: a Service Provider, a Law Firm, and the Litigant (i.e., the Individual or Organization who is a party to a legal or regulatory action subject to Discovery). Often a law firm is the sole signatory party to an agreement for discovery services and it is the law firm that exclusively directs and supervises a Service Provider for the benefit of the Litigant. The tangential relationship of the Litigant to the party requesting electronic discovery services begs the question: “is the Litigant also a Client?” If the Litigant may also be considered to be a client of the electronic discovery service provider, to which client does the Service Provider owe the ultimate duty? There may be circumstances in which the actions of the Service Provider may favor one client over the other.
Business Conflict vs. Conflict of Interest
Conflicts between the instructions or the interests of the Litigant and the Law Firm can give rise to a business conflict for a Service Provider, but not an ethical Conflict of Interest. Such business conflicts are outside the scope of this Model Code.
Conflicts with Other Codes of Conduct
Service Provider organizations often employ attorneys, accountants, and other professionals who are subject to binding rules of conduct governing ethical behavior within those professions. We recognize that these professionals may be subject to ethical obligations that are both superseding and superior to those set forth in this Model Code of Conduct, even if they are functioning in the role of Service Provider and not the role of their professional license (e.g., a licensed attorney serving as a discovery consultant, not as legal counsel).
Even though an organization determines, under the guidelines set forth herein, that it may mitigate a conflict, an employee who would be assigned to the engagement may still determine that work on such an engagement would conflict with his or her superseding professional obligations. Professionals who find themselves torn between duties to their professional ethical obligations and their duties to either their employer or Client should exercise due care in determining their individual best course of action, and the Service Provider and its Clients should be sensitive to employees who face this dilemma.
Personnel Transfer Resulting in Conflicts
The principle of the Ethical Wall (a/k/a Chinese Wall, Firewall or Screened) should apply to Service Providers to the same extent, and under the same rules, as the creation of an Ethical Wall for attorneys at a Law Firm. (See, ABA Model Rules of Professional Conduct, Section 1.10(a)(2).)