When (and How) to Fire a Client
- The public announcements by firms, following the invasion of Ukraine, that they would no longer do business with Russian interests, mark a sea change in expectations of law firm behavior.
- A recent survey of large global firms found that over 80% of them had either turned down work or cut ties with a client for ethical or values-based reasons.
- Because it’s increasingly common for firms to fire clients, and to do so publicly, it’s essential for firm leaders to have a clear, consistent framework in place for deciding who not to serve, and a playbook for communicating clearly about those decisions.
- Many times, declining or ending a bad relationship can be a win for your firm.
Shifts in popular culture, most notably the #metoo and Black Lives Matter movements, along with the rise of Gen-Z law students and lawyers, have forced firms to reckon with the once bedrock principle of non-accountability. As a recent analysis by Law.com International put it, “Russia’s invasion of Ukraine sped up a debate that was already starting to take place.”
Starting in late February, one after another, firms announced that they would be closing offices in Russia, ending work with Russian clients, and broadly disassociating themselves with any of the parties participating in or profiting from the invasion of Ukraine. Not since the mid-1980s student protests against the apartheid regime in South Africa had firms so clearly and publicly made a political choice to turn away client work.
This seemingly sudden shift was, in fact, part of a larger and more gradual movement toward a different model of business decision-making across the legal industry. Where shying away from representing a controversial client was once considered a sign of weakness — what client would want to hire a lawyer who wouldn’t stand by them on their worst day? — such moral stands are now considered a sign of strength, highly valued by both socially conscious young professionals and consumer-facing businesses in the global marketplace.
This new paradigm requires law firm leaders to think differently about who they represent and how they talk about that representation. Turning down business or firing a client is no longer a last-resort response to a hopelessly unresolvable conflict. And it’s no longer done in secret. Instead, it’s a potentially positive option to consider in a range of circumstances.
Here are some times when it might make sense to end a client relationship:
Complex Conflict of Interest
Because a single firm can’t ethically represent parties on opposite sides of a transaction or dispute, certain matters and clients are “conflicted” out. Typically, firms chose the larger, more valuable client to keep and refer the smaller party’s work out to other lawyers.
In some cases, though, the “bigger” client isn’t necessarily the one the firm should hold on to. Perhaps one party is a player in a legacy industry while the other is an up-and-comer in an emerging tech sector. In those circumstances, forward-thinking firm leaders might wish to forge a deeper relationship with the innovative business even if it means no longer serving a more established company.
Similarly, “institutional” clients, whom the firm has served for generations, sometimes hold value that is more psychological than real. Do your firm’s financials back up the idea that an older client is actually “worth” more than a newer one? What would a comparative analysis of revenue and profit say? What have been the trends over the last two years?
In a conflict, firms will have to decide which client to serve and which to refer out. Do you have the data to make an informed decision about which to choose?
Social and Ethical Concerns
In a 2022 survey by Law.com International, “25 respondent firms stated they have consistently turned down clients or matters due to concerns about unethical behavior.”
While clients linked to Russia are certainly the best-known example here, the recent decision by Kirkland & Ellis not to represent gun manufacturers is perhaps a more representative illustration of a firm making a clear strategic decision about the ethical and social ramifications of a particular aspect of its work. Other issues noted in the Law.com survey include environmental and energy concerns around climate change and pollution, human rights abuses and child labor.
Wherever a firm comes down on what values and principles matter most, the key to applying them successfully is to articulate them clearly and to incorporate checks against these criteria as part of its intake process so that they can be consistently applied.
Does your firm do well the kind of work that the client wants done? If a client has a large portfolio of patent prosecution work, but your firm doesn’t have a robust team of patent lawyers to handle it, is that really business you want to be doing?
The question is both practical — at a basic level can you get it done without risking malpractice? — and strategic. Is this the business that you want to be in? Is this who you are as a firm? If you’re not in the position to deliver high-quality work, perhaps it’s best to turn the work down at the outset.
There are some clients, especially poorly run corporate law departments, that consistently make unreasonable demands and put unnecessary strain on lawyers, contributing to burnout. Progressive law firms that have been intentional about putting associates and younger partners into more client-facing positions — a key step for improving retention — may struggle to shield those junior lawyers from bad client behavior. Before you put another workaround in place, stop to consider the cost of this relationship.
The question for the law firm leader is: How many toxic clients can you have and still maintain a healthy, productive firm culture? If retention and growth are priorities, it is imperative to set clear boundaries and hold perpetually toxic clients accountable — sometimes by sending them packing.
‘Winning’ the Breakup
As firms face these circumstances and make the tough decision to forgo revenue in service of a larger strategic goal or ethical principle, leaders have the opportunity to leverage the positive aspects of the decision to enhance its value.
Here are some ways to turn the decision to decline work or cut ties with a client into a good-news story about your firm:
Manage internal communications. Don’t keep it a secret. Be proactive in sharing the decision, and the reasons for it, across the firm. Let attorneys and staff know that leadership is making choices for the good of the firm, its people and culture.
Build your network. When letting a client or potential client know that you can’t serve them, accompany the message with a positive referral. Whether you’re saying, “I don’t have a team that can deliver for you on this” or “We have a conflict and can’t represent you,” you can always add that you want to make sure they have the best possible representation and make a thoughtful recommendation about who can serve them well. Ultimately, clients often value that connection-making and candor as much as they would the technical legal work itself. And you never know when your paths might cross again in the future.
Solidify your brand. If your message to the market has been that you’re a litigation powerhouse or a boutique for high-end deals, your portfolio of clients and matters should be consistent with that messaging. You reinforce your marketing and ultimately strengthen your position if you’re consistent about who you are and what you do.
Be Proactive on Policy
It’s almost always better to decline to take on a client in the first place than to have to fire them later. Problems of poor fit — whether in terms of service offerings or toxic behavior — rarely resolve on their own and usually get worse over time.
Build out the traditional conflicts check process that is already part of your intake procedures with checks for potential social and ethical concerns as well as matches around cultural and behavioral norms and technical skills. Don’t ignore red flags.
Articulating these parameters in the text of your client agreements lays the groundwork for clearer, more consistent decision-making when difficult scenarios arise.