The Supreme Court of Canada has just released its decision in the case of Canadian National Railway Co., v. McKercher LLP and found unanimously that the law firm should not have accepted and directed a class action lawsuit against its client CN while still representing CN on other unrelated matters.
In ruling against the law firm, the court found at paragraph 52 that:
Finally, it was reasonable in these circumstances for CN to expect that McKercher would not act for Wallace. I agree with the motion judge’s findings on this point:
The solicitor and client had a longstanding relationship. CN used the McKercher Firm as the “go to” firm. Although there were at least two other firms in Saskatchewan that also did CN’s legal work, I accept the testimony of Mr. Chouc, that the McKercher Firm was its primary firm within this province. . . . The lawsuit commenced seeks huge damages against CN and alleges both aggravated and punitive damages, which connote a degree of moral turpitude on the part of CN. Simply put, it is hard to imagine a situation that would strike more deeply at the loyalty component of the solicitor-client relationship. [para. 56]
In other words, it was reasonable for CN to be surprised and dismayed when its primary legal counsel in the province of Saskatchewan sued it for $1.75 billion.
Most clients would be surprised to find that the rules over conflicts of interest in the legal profession are far from clear. While some law firms (including Brown Litigation) observe strong loyalties to their clients and their respective interests, loyalty from one’s law firm is not always to be expected.
In an era of consolidation and mergers in the legal profession, the opportunity for larger law firms to find themselves in conflict with an existing client increase.
Further, the pressure on lawyers within those larger law firms to generate business and billings while faced with increasing opportunity for conflict with existing clients, creates a situation where client loyalty may become subordinate to the lawyer or law firm’s business interests.
While conflicts can arise unexpectedly, we work to avoid conflicts, and further strive to demonstrate and observe loyalty to our clients.
We believe that client loyalty creates greater long-term opportunity than the short term financial benefits that might accrue to moving against our client interests.
Posted by: D. Jared Brown – Lead Counsel
Case in Point 