The Recorder reports this morning on the rising number of law firm requests that clients sign broad advance waivers (or blanket waivers) that would allow the firms to act against those clients on future unrelated matters. Firms, looking to maximize the amount of business they can take on, are trying everything they can think of to get around conflict of interest rules. Clients, reasonably enough, won’t sign anything that could impair their interests down the road if they can help it.
Clients’ responses to these requests vary according to the size and leverage of both firm and client. Large clients routinely blow them off, because they can — the lawyers need their business more than the clients need these particular lawyers. Smaller clients have less leverage, so if they want to hire big firms, they pretty much have to live by the terms those firms dictate. I can see a couple of trends emerging from this, neither of which is good for large firms and both of which reflect the unintended consequences of size.
First, when a firm is so big that it has to go begging for the right to sue the client in future, the client will correctly diagnose this as a vulnerability that can be exploited. Instead of simply refusing these requests, clients will start calculating just how much (or little) they actually risk by granting such a waiver, and how much the firm has to gain by it. The client might then say to the firm, “Sure, we’ll grant you the waiver — and in return, you’ll knock 15% off all your fees and pick up the costs of a new extranet system.” Large firms’ vulnerability to conflicts is going to cost them at the bargaining table. Continue Reading