A major problem for major law firms is conflict of interest. The recent American Lawyer annual survey of the 100 top grossing law firms shows that conflict issues are becoming thornier. Ask Weil Gotshal, for instance.

Weil Gotshal & Manges is a law firm known for its top-flight bankruptcy practice and its aggressive litigators. The firm, based in New York, has more than 1,000 lawyers in 18 offices from Silicon Valley to Singapore, and was ranked eighth in The American Lawyer’s latest annual survey of the 100 top-grossing law firms, with an estimated $801 million in 2003 revenue.

Like every firm of its size and stature, Weil Gotshal has an elaborate system to safeguard against client conflicts – that is, against representing clients who have or could have conflicting interests. To prevent such problems, it requires its lawyers to fill out “new matter” forms for new clients, explaining why they are hiring the firm and what people or companies may be a source of conflicts. A computer runs through the information, looking for matches.

Despite this effort, Weil Gotshal is embroiled in two lawsuits by former clients who contend that the firm breached its duty to provide them with its undivided loyalty, as state rules on ethics require. The cases – one by the owners of a luxury shop, now defunct, in the Mall at Short Hills, N.J., and one by the pop singer Michael Bolton – stem from very different circumstances. But each case is a cautionary tale for big law firms, experts say.

As law firms have consolidated in recent years, conflicts have become a thornier issue. David G. Briscoe of the legal consulting firm Altman Weil in Newtown Square, Pa., says that as firms expand worldwide and as the level of organizational complexity goes “through the roof,” some firms have started running conflict checks as often as twice a day.

Busy partners at law firms have a lot of leeway in how they fulfill their administrative duties, Mr. Briscoe said: “If there isn’t strong central control and authority, that can be something that gets you in trouble.”

But giving lawyers much of the burden of weeding out conflicts “just doesn’t work,” said C. Evan Stewart, a partner at Brown Raysman Millstein Felder & Steiner in New York, who teaches legal ethics at two law schools in the city. Lawyers are compensated based on the fees they generate, he said, and checking for conflicts does not generate fees. “That’s not how law firms make money,” he said.

Some firms now have partners whose job is to help lawyers follow the rules without becoming too distracted from business. “I’ve seen the doctrines become increasingly complex and almost inscrutable, and that’s why lawyers need lawyers to help them stay safe,” said Stephen Gillers, an ethics expert and a professor at the New York University School of Law.

Richard J. Davis, a Weil Gotshal senior partner who advises the firm on ethical issues, said the firm viewed both of the cases against it as without merit. But like any other business in these litigious times, it is spending a fair amount of time and money to defend itself against them in court.

A state appeals court in Manhattan reinstated a malpractice case against Weil Gotshal in August, allowing the owners of the mall store, Fashion Boutique of Short Hills, to pursue their contention that the law firm represented them in a suit against the fashion house Fendi even as it also agreed to represent Prada in another case. A few months earlier, Prada had teamed up with LVMH Möet Hennessy Louis Vuitton to buy a 51 percent stake in Fendi.

Weil Gotshal did not tell the owners, Annette C. Fischer and her daughter, Randi Fischer, that it was also representing Fendi’s new owner until seven months after it started working with Prada; by then, a jury was already deliberating the Fischers’ contention that Fendi had used unfair business practices to run them out of business to protect its new flagship store on Fifth Avenue in Manhattan. In the case against Weil Gotshal, Fashion Boutique is seeking $15.5 million, an estimate of the value of lost business.

Mr. Bolton, meanwhile, sued Weil Gotshal in New York Supreme Court in Manhattan last December, seeking $30 million. The firm had defended him, along with his publisher, Warner-Chappell Music Ltd. of Britain, and his record label, Sony Music Entertainment Inc., in a 1994 suit contending that Mr. Bolton had infringed someone else’s copyright with his 1991 hit “Love Is a Wonderful Thing.” When a jury found that the song was too much like a 1964 tune of the same name by the Isley Brothers, the defendants were ordered to pay more than $5 million in damages. Mr. Bolton, however, soon learned that he was personally responsible for the entire judgment because his contracts with both Warner-Chappell and Sony said that he would indemnify them in the event of a judgment of copyright infringement.

Scroll to Top