Outside Counsel Deskbook, Legal Forms, and Related Links
Outside Counsel Conflicts of Interest Procedures
December 1996
I. Introduction
This directive provides standard procedures for the FDIC Legal
Division ("Legal Division") with respect to outside counsel conflict
of interest matters.
These procedures are designed primarily for the guidance of Legal Division personnel, although every outside counsel is expected to follow these procedures pursuant to its Legal Services Agreement ("LSA") with the Legal Division. These procedures do not provide outside counsel with any right to due process or right to a waiver.
These procedures apply to all requests for waivers of outside counsel conflicts of interest submitted to the Outside Counsel Conflicts Committee ("Conflicts Committee"), in accordance with the "2003 Statement of Policies Concerning Outside Counsel Conflicts of Interest" issued in April 2003 ("Statement of Policies"), as amended or superseded.
II. Authority of the Conflicts Committee and Regional Counsel to
Resolve Conflicts
Conflicts of Interest
The Legal Division has established a Conflicts Committee composed of
five members (four attorneys from the Legal Division and a
representative from the Office of Internal Control Management) which
under delegated authority from the General Counsel has the authority
to resolve outside counsel conflicts of interest and issues arising
under the "Minimum Standards of Integrity and Fitness for an FDIC
Contractor Regulations," 12 C.F.R. Part 366 ("Contractor
Regulations"), as they relate to law firms and sole practitioner
lawyers providing services to the FDIC. Generally, requests for
waivers of conflicts of interest may be granted or denied on behalf
of the FDIC only by the Conflicts Committee, the General Counsel or
the Chairman of the FDIC.
III. Reporting Conflicts of Interest
A. During the Application Process
Outside counsel desiring to perform work for the FDIC must meet
minimum standards of competence, experience, integrity and fitness
for contractors, as specified in the Contractor Regulations. As part
of the application process for an LSA, outside counsel must provide
information concerning actual or potential conflicts of interest and
matters that may present the appearance of a conflict. Each initial
or renewal application should be referred to the appropriate
Conflicts Coordinator for review of the outside counsel's conflicts
disclosures. Disclosures of conflicts made during the application or
renewal process should be referred to the Conflicts Committee for
resolution prior to final approval or rejection of the application,
unless the office or section does not intend to execute an LSA with
the firm for reasons other than those concerning conflicts of
interest. In such cases, a waiver request need not be submitted,
unless outside counsel was inherited and continues to perform work
for the FDIC on inherited matters.
Under the Contractor Regulations, whenever outside counsel discovers it is not in compliance with the regulations, it must disclose the matter to the FDIC in writing within ten (10) business days; however, pursuant to the Statement of Policies, the Legal Division expects matters of a sensitive or high profile nature to be disclosed immediately upon discovery.
B. After Retention
After outside counsel has executed an LSA, it has the continuing
responsibility to monitor and report in writing any actual or
potential conflict of interest or appearance of a conflict, whether
or not it is representing the FDIC on active matters at the time of
discovery. Under the Contractor Regulations, whenever outside
counsel discovers it is not in compliance with the regulations
(e.g., a conflict of interest that arises when outside counsel
contemplates representation of a client adverse to the FDIC or is
discovered during the course of representation of another client),
the matter must be disclosed in writing to the FDIC within ten (10)
business days of discovery; however, pursuant to the Statement of
Policies, the Legal Division expects matters of a sensitive or high
profile nature to be disclosed immediately upon discovery.
Conflicts of interest must be submitted to the Conflicts Committee for resolution even if the Legal Division office or section recommends denying the waiver request.
C. Failure to Disclose Conflicts or Comply with Policies
Failure to make full and timely disclosure of actual or potential
conflicts of interest, or matters that may present the appearance of
a conflict, as well as failure to comply with FDIC conflicts of
interest policies and procedures are extremely serious matters. Such
failures may subject outside counsel to corrective action including
but not limited to: (1) a letter of reprimand; (2) refusal to waive
a conflict; (3) suspension of new referrals; (4) rejection or
reduction of fee bills; (5) withdrawal of all pending matters; (6)
termination of legal services; (7) imposition of a bar to
application; (8) denial of an LSA; (9) referral to the appropriate
state licensing authorities; and, in appropriate cases, (10) civil
or
criminal actions.
It is solely within the discretion of the Legal Division to determine whether or not a conflict of interest exists. Even the appearance of a conflict may result in the denial of a waiver or other appropriate actions. In the event that matters are transferred pursuant to the corrective actions listed above, outside counsel is expected to follow FDIC policies and procedures and to cooperate fully in the orderly transfer of such matters.
Legal Division personnel should notify their Conflicts Coordinator immediately upon discovery of any undisclosed outside counsel conflict of interest.
IV. Procedures For Requesting Waivers of Conflicts of Interest
To obtain a waiver of an actual or potential conflict of interest,
or appearance of such, outside counsel must submit a written request
to the designated Conflicts Coordinator
at the Legal Division office or section with which the outside
counsel negotiated its LSA or, if that office has closed, the office
assuming the responsibilities of the closed office. Outside counsel
lacking an LSA should direct a written request to the Conflicts
Coordinator in the FDIC office or section having geographic
jurisdiction over the firm's principal office. Outside counsel
should not send waiver requests directly to the Legal Services Unit
(“LSU”) or the Conflicts Committee: waiver requests will only be
considered when accompanied by the written recommendation of the
appropriate Conflicts Coordinator with the concurrence of the
office's Regional Counsel or section's Assistant General Counsel.
Outside counsel's waiver request (or the Conflicts Coordinator's
recommendation,
absent such request) should detail, where pertinent: (1) the nature
of the conflict of interest; (2) the parties and financial
institutions involved; (3) the office responsible for
the financial institution out of which the conflict of interest
arises; (4) the nature of the work that has been, and/or currently
is being, performed for the FDIC; (5) the financial institutions (or
subsidiaries or servicers) for which work has been, or currently is
being, performed on behalf of the FDIC; (6) the FDIC oversight
attorney(s) involved in the conflict; and (7) any other relevant
considerations suggested by the Statement of Policies.
Waiver requests received by Legal Division personnel who are not Conflicts Coordinators should be immediately forwarded to the appropriate Conflicts Coordinator.
To assist the LSU in tracking conflicts matters, the Conflicts Coordinators will forward to the LSU, via facsimile immediately upon receipt, all outside counsel conflicts disclosures or requests for waiver, including those that may not present an actual conflict of interest or those subsequently waived by Regional Counsel pursuant to delegated authority. The Conflicts Coordinator will thereafter: review outside counsel's disclosure and/or request; consult with the FDIC oversight attorney(s) involved; and coordinate the formulation of a recommendation to the Conflicts Committee. The Conflicts Coordinator is responsible for the completion of all documentation for the Conflicts Committee which should include a copy of outside counsel's disclosure or waiver request, the recommendation of the FDIC oversight attorney, a conflicts tracking system form, and the Conflicts Coordinator's recommendation for resolution of the conflict with concurrence by the office's Regional Counsel or section's Assistant General Counsel.
Appropriately documented conflicts matters are to be submitted to the Conflicts Committee for consideration as soon as completed but no later than THIRTY (30) DAYS after receipt of outside counsel's disclosure or request for waiver. If additional information is needed from outside counsel or others, the Conflicts Coordinator should ensure that a timely response is received so that the 30-day submission deadline is met. If no timely response is received, the Conflicts Coordinator should refer the matter to the Conflicts Committee without the additional information. Past due matters will be discussed with the Conflicts Coordinator and Legal Division management as appropriate.
The Conflicts Committee may exercise broad discretion when a conflict of interest is discovered without disclosure by outside counsel. If determined by the Conflicts Committee to be appropriate, however, the Conflicts Coordinator may notify outside counsel in writing of the discovery and allow counsel a specified period of time to address the issue in writing; if no response is received within the specified period, the Conflicts Coordinator will refer the matter to the Conflicts Committee without outside counsel input.
Meetings of the Conflicts Committee are not public proceedings. Appearances before the Conflicts Committee by outside counsel are not allowed. Contacts with individual members of the Conflicts Committee by outside counsel are strongly discouraged. Questions from outside counsel concerning pending waiver requests should be directed to the Conflicts Coordinator or the LSU in the Legal Operations Section.
V. Determinations By the Conflicts Committee
A. Regular Processing of Waiver Requests
The Conflicts Committee either meets or conducts voting via
notational means to resolve pending waiver requests and other
matters involving outside counsel. The Conflicts Committee will only
consider requests for waiver that are appropriately documented and
are received by the LSU.
B. Expedited Processing of Waiver Requests
The Conflicts Committee will consider a waiver request on an
expedited basis for good cause shown. Good cause can be shown, for
example, when a trial date, court or bid deadline is imminent, or
when a client, potential client, or an employee of outside counsel
will be materially prejudiced by a delay in resolution of the
conflict of interest. The Conflicts Coordinator will make the
initial determination as to whether to recommend expedited
processing of a request for waiver, and will forward the request to
the LSU. A brief written justification for expedited treatment must
be incorporated into the documentation. If expedited processing is
granted, facsimile copies of the waiver request will be accepted,
provided original documents are later provided to the LSU. The
Conflicts Committee will resolve expedited requests at the earliest
possible time, customarily by notation vote with a minimum of three
concurrences required. The LSU will notify outside counsel and the
Conflicts Coordinator of the decision via facsimile followed by a
confirmation letter to the outside counsel.
C. Reconsideration of Conflicts Committee Decisions
The Conflicts Committee will entertain requests for reconsideration
of its decisions, when submitted by the appropriate Conflicts
Coordinator, upon a showing of good cause. Good cause is generally
shown by demonstrating the availability of new and significant
information or changed circumstances.
VI. Terminations and Suspensions
A. Conflicts Committee Action
If the Conflicts Committee determines that termination of outside
counsel's legal services is appropriate, matters must promptly be
transferred to other counsel or to an in-house attorney, unless an
exception is justified. For terminations and suspensions, the
Conflicts Coordinator of each affected office or section shall
distribute a memorandum or e-mail to its Legal Division staff
describing the action of the Conflicts Committee. In termination
cases, the Conflicts Coordinator should instruct staff to close,
transfer, or request exceptions for all active or inactive legal
matters assigned to the outside counsel within 45 days of the
decision and outline the internal procedures to be followed in each
instance. Terminations and suspensions of outside counsel are also
noted on the FDIC's computer tracking systems for outside counsel.
Requests for exceptions to terminations to permit outside counsel to continue representation of the FDIC on particular matters will be considered on a case-by-case basis upon the request of the oversight attorney. These requests must be in essentially the same form as a waiver request submission and must demonstrate that good cause exists to justify an exception. Factors considered typically include: (1) availability of other experienced counsel in the geographic area; (2) pending deadlines and the likelihood of replacement counsel's becoming sufficiently knowledgeable to pursue the matter effectively; (3) cost of developing applicable expertise in replacement counsel; and (4) degree of prejudice to the FDIC.
B. Lawsuits Against Outside Counsel
Initiation of suit by the FDIC against outside counsel creates a
conflict of interest requiring that no new referrals be made and
that pending cases be reassigned to other counsel or to an in-house
attorney. The Professional Liability Unit distributes a monthly list
of lawsuits against outside counsel. Notifications to staff and
requests for exceptions follow the procedure described in the
preceding subsection.
VII. Conflicts Tracking
All conflict of interest waiver requests processed by the FDIC or
RTC since January 1995 have been recorded on the Conflicts Tracking
System, CTRACK. For each waiver request, CTRACK contains all
relevant data, such as law firm information, conflict description,
recommendation for resolution, and decision. CTRACK information is
available in a read-only version in each field office and
headquarters, and written reports of pending and historical matters
may be generated by any user. The LSU is responsible for data entry
and maintenance of the CTRACK system and also generates reports of
pending conflicts matters. Updates of the conflicts data are
performed on a regular basis.
Conflicts-related information may also be found on the FDIC's computer tracking systems for outside counsel. Comments for individual firms are added to the systems after the Conflicts Committee reaches a decision. These comments contain meeting dates and brief descriptions of the restrictions imposed.
Legal Division staff whose duties involve referral of matters to outside counsel must review the conflicts status of outside counsel on CTRACK and other systems PRIOR TO referring any matter to outside counsel.
VIII. Distribution of Conflicts Committee Decisions
The LSU is responsible for notifying each outside counsel in writing
of the Conflicts Committee's decisions. Notification letters
describe any conditions or corrective actions imposed by the
Conflicts Committee and are delivered to the firm by Certified
Mail,
Return Receipt Requested. The letter states that "The decision of
the Committee is effective upon receipt of this letter." Receipt is
evidenced by the return of the Certified
Mail
Receipt.
Conflict waiver requests and determinations are confidential and are not to be communicated to anyone outside the FDIC, except the outside counsel affected by the determination or as necessary in litigation or other matters after approval by the Conflicts Committee.
IX. Other Responsibilities of Conflicts Coordinators
Each Conflicts Coordinator is responsible for maintaining adequate
documentation concerning all requests for waivers of conflicts of
interest within the office's or section's jurisdiction.
Documentation should include, at a minimum, the following: (1)
correspondence received from outside counsel disclosing the conflict
and/or requesting a waiver; (2) internal correspondence between the
oversight attorney or others involved in the conflict; (3)
recommendation to the Conflicts Committee for resolution of the
conflict; and (4) copy of the LSU’s letter notifying outside counsel
of the Conflicts Committee's decision.
Outside counsel are responsible for compliance with the Statement of Policies. However, the Conflicts Coordinators should generally monitor compliance by outside counsel within their jurisdiction with the Statement of Policies. If the Conflicts Coordinator is notified that the representation or other type of conflict resulting in a conditional waiver is concluded or otherwise resolved, the Conflicts Coordinator is to provide written notice to the LSU, which will ensure that the indicated changes in status are reflected on the FDIC's computer tracking systems for outside counsel.
Conflicts Coordinators should send ALL reported or discovered conflicts and conflicts-related disclosures to the LSU, even those that indicate a conflict may not exist under the circumstances presented.
X. Effective Date
These procedures are effective immediately. Any questions should be
directed to the LSU of the Legal Operations Section, 550 17th Street
N.W., H-3007, Washington, D.C., 20429, (202) 736-0079.