A Business article Sunday misidentified the law firm of attorney Thomas W. Brunner. He is partner at Wiley, Rein & Fielding and formerly worked at Piper & Marbury. (Published 11/20/90)

Bill Alberger knew he might be in trouble when the Washington law firm of Bishop, Cook Purcell & Reynolds began merger talks last spring with Chicago's Winston & Strawn.

Alberger, a Bishop, Cook partner, was used to seeing attorneys from the big Chicago firm sitting across the table from him as his adversaries when he represented clients before the International Trade Commission and the Department of Transportation. Since the merger of the two firms was approved in September, he's been out looking for another job because of conflicts of interest between his clients and those of the merged firm.

Alberger's not the only one.

Such conflict situations are multiplying in law firms throughout the country, a product of a merger trend that has produced not only larger firms but also longer lists of clients within the firms whose needs and interests may collide.

In the Winston & Strawn merger, for example, each partner of the two firms pored through lists of thousands of clients going all the way back to one of its first, the late composer Irving Berlin, to look for conflicts.

The new megafirm, a 475-lawyer Winston & Strawn, emerged without nine of its attorneys -- including Alberger, cable industry lawyer Mark Palchik, former U.S. attorney Joseph diGenova and Randolph May and his communications group -- because of conflicts of interest.

Each of the attorneys is confronted with finding a law firm whose client list won't bump up against the interests of his own clients.

"I've got conflicts all over the place right now," said former ITC chairman Alberger. "It really narrows the field."

"Some of the biggest and best firms in the country are involved in conflicts cases," said William Freivogel, associate loss prevention counsel for the Attorneys' Liability Assurance Society Inc. ALAS is a lawyers' insurance group that is owned by 375 large law firms around the country and tries to help its member firms avoid conflicts.

What is at stake is not just the law firm's reputation with clients, but huge financial losses to firms if they are sued by clients or disqualified by judges on the basis of conflicts.

Consider the case of the New York law firm of Fried, Frank, Harris, Shriver & Jacobson and their client, former stock speculator and convicted inside trader Ivan F. Boesky, in what could be the granddaddy of all conflicts cases. The suit, brought by former limited partners of Boesky, alleges that after Fried, Frank represented Boesky in the formation of a $1 billion limited partnership, it also represented him in secret negotiations with the federal government regarding his fraud.

The suit, naming Fried, Frank and others including convicted junk bond trader Michael Milken, alleges that the firm should have informed the limited partners, who invested with Boesky, of his criminal problems during the months when the negotiations were going on.

Plaintiffs in the case have asked that their original investment with Boesky be returned to them with interest -- an amount that could reach $275 million.

With a dollar amount like that looming, law firms across the country are watching the case, which has been delayed until after Milken's sentencing on stock fraud charges this week.

For District attorneys, conflict problems will become more acute on Jan. 1, when the D.C. Bar's new rules of professional conduct go into effect.

The D.C. Bar's new rules are somewhat more specific about what constitutes a conflict of interest than previous rules, said Steptoe & Johnson's Robert E. Jordan III, chairman of the D.C. Bar committee that wrote the rules. In the past, law firms -- eager to bring in new business through law firm mergers or by hiring senior partners -- have tried to solve the conflict problem by restricting communication between attorneys who represent competitors. But under the new rules, that may not be good enough.

Jordan said that after the new rules take effect, law firms will be taking a much greater risk of violating bar rules if they hire senior attorneys but do not deal with conflicts by dropping certain clients. "One of the things that will really retard the trend toward megafirms is the presence of conflicts," said Daniel W. Toohey, managing partner at Washington's Dow, Lohnes & Albertson.

Bar to Mergers Conflicts are a significant bar to law firm mergers. Merger talks often break down once firms realize that they would have to give up some of their biggest clients because of conflicting representations.

But mergers aren't the only cause of conflicts. Attorneys, who once stayed with a firm for life, move around more frequently now and are thus more likely to get caught in a sticky wicket of conflicts.

Mergers of businesses that are law firm clients also have complicated the conflict issue. And corporate executives say they are carefully monitoring law firms they hire these days, insisting that firms that represent them do not represent their competitors.

In an economic environment where many law firms are struggling to bring in new business and where there are fewer corporations to represent because of corporate mergers, it may be tough to turn away clients, attorneys said.

"Law firms are driven so much by the need for billings," said Dennis M. Gingold, a banking partner at Washington's Ross & Hardies, who recently left the D.C. office of Foley, Hoag & Eliot because of conflicts with the firm's real estate practice. "If you have to constantly turn away business, you can't practice law very effectively."

A case more than a decade ago that started many local firms worrying about conflicts involved the Chicago firm of Kirkland & Ellis and its Washington office. The Chicago office was representing Westinghouse Electric Corp. in a case against uranium producers, while attorneys in the Washington office represented members of the American Petroleum Institute who were involved as defendants in the same suit.

On the eve of the trial, the firm was disqualified by the judge. Westinghouse shareholders sued the firm and came to a confidential settlement out of court. Many Washington lawyers remember the case as the beginning of more serious methods of looking at conflicts -- including computerized cross-checks and panels at the big firms to review possible conflicts.

Law firms can keep corporate competitors as clients provided the companies waive their objection to the conflict. But these days, law firms are turning away new clients fairly regularly because of conflicts, legal experts say. In some cases where two current clients have a conflict, firms don't choose one party over another, but instead find someone else to represent both clients, according to Toohey.

But individual attorneys or practice groups at Washington firms have been finding those high-minded practices harder and harder to live with, judging from the number of attorneys who have left firms for law offices where they would experience fewer conflicts.

Because of conflicts arising from the Winston & Strawn merger with Bishop, Cook, the Washington firm's hefty communications practice, led by senior partner Randolph May, must go its own way.

DiGenova also had a communications client conflict, having represented an association on one side of the cable television legislation, while Winston & Strawn had lobbied on the opposite side. None of the former Bishop, Cook attorneys who had conflicts has yet found another law firm to join.

Attorneys who specialize in trade issues often find themselves in conflict situations. Washington attorney Gilbert B. Kaplan, who represents U.S. clients on trade issues, only weeks ago moved from the Washington office of the California firm Morrison & Foerster to Washington-based Hale and Dorr because his former firm represented foreign clients.

"They'd made some effort to work things out ... but I gave up some substantial business in the field of international trade," said Kaplan.

A Conflicts Nightmare A huge potential for conflicts exists in the environmental field, where insurance firms and manufacturers battle through issues involving hazardous wastes -- an area that Steptoe's Jordan calls a "conflicts nightmare."

The financial stakes are huge and the government often finds literally hundreds of companies that are potentially responsible for the costs of cleaning up hazardous wastes. Because the interests of each company are different, each must have separate counsel.

Thomas W. Brunner, now an attorney who represents insurance companies in environmental cases, left Wiley, Rein & Fielding in the District several years ago. Wiley, Rein was representing manufacturers that were "increasingly unhappy that we were taking the opposite ideological position," said Brunner, who left along with six other attorneys to join D.C.-based Piper & Marbury.

Lawyers admit that other issues sometimes lie behind what they call conflicts.

"Conflicts can be a convenient fig leaf for those who are looking for other reasons {to leave}, like money," said Brunner.

But conflicts will continue to bedevil corporations and law firms alike, law firm managers said. "It's not going to go away -- it's going to get worse," said J. Michael McGarry III, managing partner of Winston & Strawn's Washington office.

And as the problems continue, clients and judges alike will be the real monitors of legal conflicts, some believe.

"There are still some firms that are somewhat cavalier about it," said Freivogel. "Older lawyers are not as in tune because they are used to being arbiters of what clients they'll take. Now judges are taking that role."