One case assigned to you is a 14-year-old juvenile in detention due to a previous gun charge, who is currently facing a car theft charge. The juvenile has a third-grade reading level and has been recently diagnosed with borderline personality disorder and ADHD, but with limited treatment options in juvenile detention. The prosecutor presents an offer and the professor encourages you to persuade the juvenile to take it and move on to the next case. The local attorney wants you to spend more time researching before coming to a decision. It's close to semester finals and you sit in your room wondering what to do.
Example B
You're a junior associate tasked with helping a senior partner on an acquisition. Your client is an internet security company looking to buy another firm in its industry. Your client was recently part of a majority purchase by a private equity firm. The private equity firm owns 55% of your client, the CEO owns 10%, and the remainder of the firm is owned by wealthy individuals and family offices with little expertise in the space.
The CEO and your senior partner are good friends, and the CEO is seeking to divest a substantial business line of the company to raise cash for this contemplated acquisition. Since your client just completed the private equity firm deal, you wonder if divesting a big part of the business is what the private equity owner would want the CEO to do. To make matters more interesting, the company the CEO wants to buy is also owned by the same private equity firm.
Perhaps you see the issues quickly, perhaps not. What you need is a framework to address and best manage the fiduciary issues before you give legal advice.
Our framework:
1 Who is the client?
2 Who is representing the client and/or giving guidance to you?
3 What conflicts of interest could this person have?
4 What conflicts of interest might you have?
Let's use our hypotheticals to work through the framework.
1 Who is the client?
In Example A, it's the juvenile. In Example B, it's the internet security company. That's obvious, but then you look to the next question.
1 Who is representing the client and/or giving guidance to you?
Unlike a simple situation where a person hires you to defend them in a lawsuit and they give you direction, these cases are a bit different. In Example A, the juvenile may not be able to give you any direction, so you are getting advice from both the local attorney and the professor. In Example B, the CEO is giving you direction. The senior partner is most likely giving you guidance as well. This leads to the next question.
1 What conflicts of interest could this person have?
In Example A there are potential conflicts with the professor trying to move work off her plate. Getting this case done leaves more resources for others. The local attorney could have a conflict depending on her relationship with the prosecutor.
In Example B, the CEO owns 10% of the company. They may or may not be aligned with the wishes of the majority owner, the private equity firm. If they are not, you have a problem. Even if they are, the private equity firm and CEO may not be aligned with the rest of the shareholders. This isn't a case where the majority of ownership is all that matters. It's what is best for your client—the company—that matters. If there was situation where the CEO and private equity firm wanted to do something in their best interests to the detriment of the rest of the shareholders, you have a real issue. Also, the senior partner and CEO are good friends, which can play into the conflict dynamics here. Okay, now let's look to the last part of the framework.
1 What conflicts of interest might you have?
In Example A, your potential conflicts are that you might want to get a job with the local attorney and, therefore, overweight the advice she gives you. You want to look good in front of her, so why not agree with her? Your other issue is that finals are right around the corner, and you need to turn your time and attention to exams. Lastly, the professor oversees your grade and why go against her advice?
Example B is the classic potential conflict of you trying to impress the senior partner and the CEO as the junior person while not paying attention to the actual client, the company. You get trapped thinking they are all one in the same. Sometimes they are. Sometimes they are not. The salient point is to recognize that you owe a fiduciary duty to the company, an abstract entity with numerous stakeholders (shareholders, officers, and employees). The CEO and PE firm speak for the company at times, but possibly against it at times, without ever letting you know there's a subtle switch. Be hypervigilant, and always consider whether there is a fiduciary duty in play.
Principle 2: Slow Down
Rarely is speedy decision-making required. Quick thinking, on the other hand, is a regular occurrence, especially for litigators. But even litigators have time to organize relevant facts, step into another's shoes, effectively analyze the situation, and reach a thoughtful decision. More formally, this is called the duty of care, and it's vital to being a fiduciary.
In today's constant communication world, texts, emails, Slacks, and Voxes encourage speed, which tends to reduce thoughtfulness. This is especially true under pressure from clients, bosses, and yourself. The concept of failure being celebrated or encouraged by some ecosystems (like startups) is not an option as a fiduciary.
While we encourage rapid learning and measured risk taking, you don't get a free pass as a fiduciary if you are moving too fast or don't take the proper care on a matter. A corollary is to not get overcommitted. We've all done this, and it often leads to shortcuts. Don't take on a fiduciary relationship unless you can devote the necessary time to it.
Slowing down and taking time also means doing due diligence. Diligence is one of the first tasks any lawyer should do and is a valued skill no matter what your practice area may be. Suffice to say is that figuring out what you know, what you don't know, and where you need help are key aspects to understanding any decision you are going to make on behalf of someone else. Take the time to do it.
Principle 3: Seek Advice and Help
Related to slowing down and diligence is seeking advice and help. While always applicable, this is particularly important when acting as a fiduciary because our egos get in the way of seeking help, especially when it reveals inexperience. You can make disastrous career-ending mistakes by failing to seek help. Heed Principle 2, above: speed often compounds mistakes and makes it more unlikely to seek appropriate advice and help. Take time to seek necessary advice, which in a firm setting is free (even if you have to pay for it, it's worth every penny). If not in a large firm, reach out to your local bar association and your personal network. Maintain connections with your professors in your relevant area. At least Google it, okay? But also don't forget to listen to your stomach that you are in over your head and take action to correct it.
Principle 4: Always Put Your Clients' Interests Ahead of Your Own
This is the single most important principle and solves most fiduciary problems if faithfully implemented. Step into your client's shoes, examine every angle of the situation from their perspective, and determine what is best for her or him. Like Principle 3, this involves checking your ego; like Principle 2, it requires devoting time to the relationship. While acting as a fiduciary, continually ask this question: What would I want an expert to do for me if I was the client? Or put another way, use absolute tunnel vision to analyze what is best for your client. Forget about everything else. Now open up the aperture and ask if anything makes you feel uncomfortable about that vision given the exogenous