What is conflict of interest in the context of legal malpractice? In a recent decision that came down from Judge Hoffman, of the Federal Bankruptcy Court in Boston, it was determined that a large Boston law firm operated under a conflict of interest when representing both the fitness chain and the principal investor in the operation.
Bankruptcy Case Found Conflict of Interest in Legal Malpractice
When the fitness chain filed for bankruptcy protection the Court appointed Attorney Gary Cruickshank a federal bankruptcy trustee. Trustee Cruickshank was reviewing the “bankruptcy estate” and determined that the advice of the Goodwin Proctor attorneys was a “material, undisclosed and unwaivable conflict [of interest] in its dual representation” of the principal and the investors. That conflict, according to Trustee Cruickshank, resulted in fraudulent transfers of monies out of the bankruptcy estate (which he represents) and into the hands of one of the parties that Goodwin represented.
The Goodwin attorneys argued that the statute of limitations had run for the Trustee to bring the claims because even though Goodwin continued to represent the parties, it was for different matters. Trustee Cruickshank argued that
a person seeking professional assistance has a right to repose confidence in the professional’s ability and good faith, and realistically cannot be expected to question and asses the techniques employed or the manner in which the services are rendered…see Murphy v. Smith, 411 Mass 133 (1991) and Lyons v. Nutt, 436 Mass. 244 (2002)
The court found in favor of the Goodwin attorneys on this argument because of the various matters that the Goodwin attorneys worked on.
Bankruptcy Court Found Adverse Domination was Conflict of Interest
However, Trustee Cruickshank also argued that, like in the famous Demoulas decision in 1994 regarding “adverse domination” the Goodwin lawyers had their clients, the parties, sign misleading documents in favor of one party. Essentially, if the company is dominated by a person that is averse to the interests of another owner of a company, it is a conflict of interest for the lawyer to represent both sides. In this case, the Court found that the lawyers at Goodwin represented both sides. The Goodwin lawyers “owed a duty of undivided loyalty to BFG, and the conflict presented by their simultaneous representations of other potentially adverse parties may have breached that duty,” the Court decided.
Lawyers Often Believe that they are Wise Enough and Cleaver Enough
Attorney Neil Burns and other legal malpractice experts were interviewed by Lawyers Weekly about legal malpractice in conflict of interest cases. The conflict can be boiled down to a big Boston law firm trying to represent (and bill) the manager of a company and the investors while the manager was paid and the company ended up in bankruptcy. Attorney Burns stated:
Lawyers often believe they are wise enough and clever enough not to be seduced into conflicting representation. But what I’ve found is that you can’t zealously represent your client if there is any potential for a conflict.
The bottom line is if there is any potential for a conflict of interest in representing two (or more) parties, the lawyer must decline representation. As Lawyer’s Weekly staff writer stated:
Neil Burns of Boston, who handles legal-malpractice cases a part of his practice, said he also sees the case as a cautionary tale in which, if the allegations are true, the lawyers faced a “clear” potential conflict.
Legal Malpractice Lawyers in Boston Offer Free Consultation
Call Attorney Neil Burns or Attorney Roshan Jain, at Burns & Jain, LLC, for a free legal malpractice consultation. 617-227-7423