Professionals strive to develop a reputation within a particular field. The real success stories involve those who are known as the go-to professional for one or more situations. A problem with such success is that it may increase the risk of potential conflicts. If all clients seek the same professional for Issue X, there are bound to be conflicts down the road. In a recent case in the Southern District of Florida, one company alleged that its accountants and lawyers violated their professional duties when they provided proprietary information to a competitor.
The Florida case involves an insurance company which sought to market a new type of casualty insurance product. In addition to retaining a law firm and accounting firm to provide tax and regulatory advice, the company hired an outside marketing company to help advertise the new product. However, the insurance company discovered that the owner of the marketing company later started his own business selling a virtually identical casualty insurance product. In doing so, the owner of the new competitor retained the same law firm and accounting firm as the insurance company, raising red flags immediately.
The insurance company is now claiming a litany of duties have been breached and that both firms used confidential information to help assist the new business in duplicating its product.
While the case is still in the early stages of litigation, it raises a fundamental problem professionals face. Years of exposure to certain types of clients provides inside information on what works and what doesn’t. While it is certainly helpful and acceptable to provide general advice based on this experience, professionals have to be wary of providing specific information about other clients.
In addition to potentially breaching ethical standards, these actions can disrupt a market and cost other clients significant revenue. When profits drop, lawsuits are not uncommon and it is important that attorneys and accountants do not place themselves in the cross-hairs by walking too close to this ethical line. We’ll have to keep an eye on the outcome of this case to see the defenses asserted and whether it results in a reported decision.