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Conflicts of Interest
Although a consulting agreement may contain just a simple statement reminding the consultant that they must avoid any conflicts of interest, the obligation of the employer/attorney hiring the expert may be greater than that of the consultant to verify the consultant is truly not conflicted.
What are conflicts of interest?
Conflicts of interest can be defined as any situation in which an individual (or corporation) is in a position to exploit a professional or official capacity in some way for their personal or corporate benefit.
In terms of experts, a conflict of interest can arise when the expert or his/her partner (spouse, business partner, etc.) or employer, has a financial or other interest that could unduly influence the expert’s position with respect to the subject-matter being considered. An apparent conflict of interest exists when an interest would not necessarily influence the expert but could result in the expert’s objectivity being questioned by others. A potential conflict of interest exists when a reasonable person would be uncertain as to whether or not the interest should be reported. Examples of conflicts of interest:
A proprietary interest in the subject matter (e.g., ownership of the patent in question)
- A financial interest (e.g., shares) in a business with an interest in the subject matter
- Recent employment in a business with an interest in the subject matter
- Direct or indirect financial or other benefit or promise of such benefit from a business with an interest in the subject matter
- Confidentiality obligations from past employment
It is important to note that conflicts of interest do not only apply in legal cases. As an example: Expert is hired to provide technical advice to Company A. Expert has a significant number of shares in Company B, Company A's competitor. Expert has a conflict of interest that must be reported before beginning work with Company A. Company A may choose to waive the conflict -- it is not Expert's determination to make.
Problems Arising from Expert’s Conflict of Interest
Not only can an expert be disqualified from a particular case if an expert’s conflict of interest is uncovered, the expert will likely have his reputation permanently damaged and thus hinder his ability to find new work as an expert witness. Depending on his area of expertise, the expert may face professional discipline with a professional organization. The attorney may also be disqualified from the case or subject to a claim of malpractice for not thoroughly researching the expert before retaining the expert. Further, neither the lawyer nor his client will be pleased to see that a new expert must be retained at the last minute.
How to avoid expert conflicts of interest
When interviewing potential experts, the Attorney/Employer should disclose to the expert:
- the names of all potential or actual parties to the case
- the names of all and counsel (both sides)
- a copy of the complaint (if it exists)
- a copy of the opposing expert’s opinion (if permitted and if it exists) so that the expert can determine if he or she has previously rendered an opinion on those facts or circumstances.
The expert should disclose the following to the Attorney/Employer:
- All previous employment, specifically including any employment for the opposing party or the opposing party’s counsel
- Any contact with the opposing counsel
- Any articles, books, lectures that have been written or disclosed by the expert on the subject-matter
- Any financial or other interest in the opposing party’s business or the subject matter of the case
Experts should continually be aware of possible conflicts of interest and should disclose any potential conflicts as soon as they arise.
Attorneys should not actively seek out experts to interview with the sole purpose of creating conflicts and limiting the pool of experts for the opposing attorney. If the court suspects that an expert was contacted to create a conflict, the court may refuse to disqualify the expert. In that case, the intentional disclosure of confidences to the now-other side's expert may boomerang.
Preventing conflicts of interest through tight consulting agreements is the employer’s/lawyer’s first line of defense against potential claims of negligence or malpractice in retaining an expert without a proper vetting of the expert.
- No Conflicts. Consultant represents and warrants that it has no current commitments or obligations that will conflict with or otherwise interfere with or impede the performance of the services called for under this Agreement.
- No Conflict of Interest. Consultant affirms that there exists no actual, potential or appearance of conflict between Consultant and its business or financial interests (including, without limitation, those of his/her immediate family members and business partners), and Consultant’s performance of the Services.
- No Conflicts. Consultant represents and warrants that: (a) Consultant is not bound by, and will not enter into, any oral or written agreement with another party that conflicts in any way with Consultant's obligations under this Agreement or any agreement made or to be made in connection herewith; and (b) Consultant's agreements and performance under this Agreement and such related agreements do not require consent or approval of any person that has not already been obtained.
- No Conflicts. Consultant represents and warrants that he is not a party to any agreement or business relationship that conflicts with the terms of this Agreement or that adversely affects Consultant’s ability to perform the Services for Company. Further, Consultant agrees that he will not enter into any such agreement or business relationship during the term of this Agreement.
- Conflicts. Consultant shall perform the Services in good faith and shall avoid any conflicts of interest in the performance of its obligations under this Agreement.
- Conflicts. I represent that my performance of all the terms of this Agreement does not and will not breach any agreement I have entered into, or will enter into with any third party, including without limitation any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to commencement of my Relationship with the Company. I represent that I do not presently perform or intend to perform, during the term of the Consulting Agreement, consulting or other services for, and I am not presently employed by and have no intention of being employed by, companies who businesses or proposed businesses in any way involve products or services which would be competitive with the Company’s products or services, or those products or services proposed or in development by the Company during the term of the Consulting Agreement (except the companies listed in Exhibit X). If, however, I decide to do so, I agree that, in advance of accepting such employment or agreeing to perform such services, I will promptly notify the Company in writing, specifying the organization with which I propose to consult, become employed by, or otherwise provide services to, and provide information sufficient to allow the Company to determine if such work would conflict with the interests of the Company or further services which the Company might request of me.
Ideally, the expert would also sign a confidentiality agreement and a protective order. Should the expert not be permanently retained for the case/project, such agreements would protect the client in the event that the expert later sought to testify for an opponent.
This article is part of the blog series Improving Your Expert Consulting Agreement.