The Rising Cost of Conflicts of Interest: Large Legal Malpractice Claims and Risk Management Best Practices
For the first time in several years, both the frequency and severity of legal malpractice claims are rising.1 Of particular concern is the role that conflicts of interest play in driving increasingly large settlements, judgments and claims. Here, we review several recent large legal malpractice cases involving conflicts of interest, the impact of such staggering payouts and best risk management practices firms can use to avoid or mitigate such exposure.
Recent Cases
Cooley LLP: US$25.4 million judgment (2026)
In July 2026, the Superior Court of New Jersey entered a judgment exceeding US$25 million against Cooley LLP after a jury finding that the firm had an attorney-client relationship with the individual founder of its entity client, Symbiomix Therapeutics, and that Cooley breached the applicable standard of care with respect to the founder.2 Despite an engagement letter stating that Cooley would represent the company and not any individual, the firm allegedly advised the founder on matters directly affecting his personal interests, including his intellectual property, equity and employment terms, while simultaneously representing the company in negotiations with venture investors. Cooley allegedly advised the founder to assign his intellectual property to the company without compensation or clawback rights and drafted an employment agreement that allowed him to be fired without cause and without equity-vesting protection. The founder was then terminated, and 28% of his equity was repurchased at US$0.01 per share before Symbiomix was acquired for at least US$150 million.
Surprisingly, seven signed documents expressly stating that Cooley represented the company, not the individual founder, were not enough to dismiss the case, which proceeded to a six-week jury trial. The jury found that an attorney-client relationship existed between the firm and the founder, that Cooley breached both the standard of care and its fiduciary duty, and that these breaches caused the founder US$15.6 million in damages. After fees, expenses and prejudgment interest, the final judgment totaled US$25.4 million. Cooley intends to appeal.
This case highlights the potential for conflicts in venture financing and earlystage startups, where a law firm’s duties to a company and its founder often overlap and “the founder is the company in every practical sense.”3 Although founders rarely opt to retain separate counsel for equity and employment arrangements, this US$25 million verdict should give counsel pause about continuing such practices without adequately maintaining clarity about who the client is and the fiduciary obligations owed to them.
Cokinos Young PC: US$4.7 million arbitration award and judgment (2024-2025)
In 2024, a conflict of interest led to a US$4 million legal malpractice suit against the mid-sized regional Texas law firm Cokinos Young arising out of a commercial real estate purchase in Austin. Terry Black of famed Terry Black’s Texas BBQ and related entities sued the Texas-based firm and one of its attorneys, alleging that the firm represented both sides in the property purchase and breached its fiduciary duties when the seller’s attorney solicited higher offers to increase the sales price and his commission.4 Although there was a letter of intent for the purchase of the property for US$10 million that had been accepted by the seller and the Blacks had agreed to additional terms, the Cokinos attorney delayed the transaction and solicited higher offers from third parties. This resulted in an ultimate sales price of US$14 million.
Cokinos Young had previously been retained by the Black family and businesses to provide legal services, including prior property purchases. Once that representation came to light, the firm advised all parties in the transaction that they would need to waive potential conflicts for the firm to continue participating in negotiations, and both sides initially agreed. Notably, that waiver was based solely on the attorney’s limited request in which he represented that the seller had already waived the conflict and that a statement was needed from the Black family parties affirming that they also waived the conflict. The result was a “cryptic and uninformed” statement that “(we) waive the conflict with Cokinos Young.”5
The court noted that the attorney “made no disclosures concerning the pros, cons, advantages, disadvantages, nature, or implications of the conflict, and the Blacks were not advised to retain independent counsel prior to consenting to a waiver.”6 Nor did the attorney make clear whether the firm would represent only the seller or also represent the Black family parties in the transaction.
The case proceeded to arbitration, where the panel noted in its award that the firm and attorney owed a fiduciary duty of loyalty to the Blacks, who were existing clients of the firm, and the breach of this duty through conduct that was adverse, even adversarial, was the proximate cause of actual damages resulting from a US$4 million increase in the purchase price. The panel further remarked that the attorney displayed a lack of loyalty in seeking, and in the manner he sought, a waiver of conflicts given the firm’s representation of both sides. The attorney favoured what he believed to be “his client” over other firm clients and did not make clear that he intended to represent only the seller, leaving the Blacks to reasonably believe that “their” law firm was representing them as well. The panel acknowledged that despite the Blacks failing to ask questions to clarify the nature and impact of the waiver, “that sensitive and important duty falls on the shoulders of the lawyer to carefully explain, not the client.”7
Although the parties disputed whether the conflict violated Rule 1.06 of the Texas Disciplinary Rules of Professional Conduct, the panel commented that “a violation of the disciplinary rules is not necessary to establish civil liability for attorneys,” citing a warning in the comments to Rule 1.06 that it is inadvisable to act as an advocate against a client, even if the matter is wholly unrelated.8
The Harris County 295th Judicial District Court granted the plaintiffs’ motion to confirm the award and entered the final judgment order on December 23, 2025.
Dentons US LLP: US$32.2 million Verdict Upheld (2022)
In 2022, Dentons lost its appeals to overturn a US$32 million malpractice verdict involving in an underlying patent case in which its U.S. attorneys were disqualified for failing to disclose conflicts with their Canadian counterpart.9 The client, RevoLaze, retained Dentons US to represent it in infringement cases against several clothing companies over its patents for laser technology used to make new jeans look faded. Gap Inc. moved to disqualify Dentons US because Dentons Canada represented Gap in other matters.
Despite its arguments that Dentons US was separate from Dentons Canada and that Gap had waived potential future conflicts in its agreement with the Canadian firm, the Dentons branches were considered a single firm, and Dentons US was disqualified from representing RevoLaze while Gap was involved in the case. After RevoLaze had to retain new counsel and the associated expense allegedly pressured a settlement, it sued Dentons US for malpractice, and a jury awarded RevoLaze US$32.2 million in damages.10
Dentons employed a “Swiss verein” structure, treating branches in different countries as separate firms, like other large global firms such as Baker & McKenzie, DLA Piper and Norton Rose Fulbright. Dentons argued that the firms were financially and operationally separate. However, they shared a common conflict base that disseminated clients’ confidential information throughout the organization, which an appellate judge noted was “irreconcilable with Dentons US' contention that it was separate from Dentons Canada.”11 The appellate court found that Dentons should have obtained written consent from both Gap and RevoLaze before beginning the RevoLaze representation. The court further stated that the written consent should have provided RevoLaze with a full explanation of the conflict, including alternatives such as seeking an independent opinion on the conflict issue, and should have suggested that RevoLaze retain standby counsel if Dentons was disqualified.
These are only a few examples of large conflicts-of-interest cases, and even larger verdicts and judgments have arisen from conflicts-of-interest issues. Baker & McKenzie was found liable in a case alleging it helped one client strip another client of millions of dollars in assets and was hit with a US$103 million damages award.12 Although it was able to get a retrial on damages, its liability was affirmed. After a US$45.6 million jury verdict, Jones Day settled a case alleging it concealed a US$6 million markup to be split between the client’s partner in the transaction and the seller.13
The impact of costly conflicts cases and risk transfer solutions: Lawyers’ professional liability (LPL) insurance
These high-value cases may signal a trend toward courts holding firms more accountable for alleged failures in conflict management. “Not surprisingly, conflicts of interest have been broadly condemned for the damage they cause to the attorney-client relationship and the legal profession.”14
Cases like Cokinos Young demonstrate that clients are increasingly willing to pursue substantial damages claims based on conflict-of-interest theories, not only against large global firms but also against other entities. Beyond the financial impact and potential professional discipline, failing to manage conflicts properly and the resulting malpractice claims can undermine trust and cause significant reputational damage.15
“Conflicts of interest also remain a particularly important source of exposure and concern for carriers, in part because they can resonate strongly with juries and, at times, with judges who may bring their own assumptions about the profession to those allegations.”16 Underwriters will be looking closely at conflict-of-interest information on applications, and firms will want to highlight their conflict-check procedures, including the software the firm uses and all internal risk management procedures, to obtain the most favourable terms.
Firms should carefully review their professional liability insurance policies to ensure adequate coverage for conflict-related claims, paying particular attention to key provisions such as:
- Supplemental coverage for disciplinary proceedings and any sublimit on that coverage
- Definition of “professional services”
- Exclusions for intentional or fraudulent acts
- Notice and cooperation requirements, among other things
Risk management best practices
Analyzing conflicts of interest is often a complex, fact-intensive inquiry. To mitigate the risks posed by conflicts of interest, law firms should prioritize robust protocols and best practices:
Utilize comprehensive client intake and conflict clearing procedures.
This should go without saying: Include the names of all parties involved, particularly any additional entities and individuals relevant to a business entity and any prospective clients who share confidential information. “Ignorance caused by a failure to institute such procedures will not excuse a lawyer's violation of this rule.”17
Confirm the conflict can be waived and consult ethics committees when in doubt.
“If a conflict issue seems murky, seek guidance from bar associations or ethics committees before proceeding.”18 When in doubt, reach out. As shown in the Cokinos Young case, assuming a conflict is waivable and seeking waivers during negotiations can have dire consequences.
Remember that one attorney’s conflict of interest is generally imputed to the entire law firm. ABA Model Rule 1.10 provides that while “lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9.”19
Maintain robust, proactive conflict disclosure and informed consent processes.
As we saw in the Cokinos Young and Cooley cases, a written waiver or signed release may not be sufficient, especially when the party was not properly informed of the potential conflict. Pursuant to ABA Model Rules 1.7 and 1.9, the lawyer is required to disclose the facts and circumstances surrounding the potential conflict to enable the client to make an informed decision about the attorney-client representation.
ABA Model Rule 1.0(e) provides that “informed consent” requires the lawyer to communicate adequate information and explanation about the material risks and reasonably available alternatives to the proposed course of conduct. Prioritize informed consent by providing timely, detailed and transparent disclosures about the nature of the conflict, the risks involved and the steps the firm will take to mitigate those risks. The disclosures should also address whether developments could eventually require withdrawal or trigger disqualification proceedings, as the Dentons case shows could affect the client’s ability to pursue or defend their case.
Document everything.
Documentation becomes critically important when a claim arises. Malpractice defences are sometimes only as strong as the paper trail supporting the attorney’s and/or firm’s version of events. Document everything disclosed about the conflict issues, as well as any advice, such as recommending that they obtain separate or independent counsel, in a letter or email.
Check for conflicts arising mid-representation.
Unforeseeable developments, such as the addition or realignment of parties in litigation or changes in control or organizational affiliations, could create conflicts during a representation. Such events should prompt a fresh conflicts analysis.
Update engagement letters throughout the representation.
Identifying the client in the initial engagement letter is not always enough. Revisiting who the client is when the scope of work expands can help protect against claims that an unintended attorney-client relationship formed. Confirming in writing who you do not represent is another best practice when there is any question or grey area.
Create and maintain effective information barriers and confidentiality safeguards.
For lawyers moving between firms or from government to private practice, ethical screens, such as separate staffing and restrictions on their access to information, should be employed to prevent improper sharing of confidential information. In addition to attorneys, consider whether lateral staff hires may need to be screened for their knowledge of confidential client information from their prior employment. The firm should be prepared to demonstrate that it effectively screened the relevant individuals if challenged.
Conduct regular conflicts training, testing and monitoring.
Regular education and training on conflict identification, disclosure and resolution for both attorneys and staff are an important part of an effective conflict management system. Test the firm’s policies and procedures through periodic test cases or audits and monitor for compliance.
The rise in large conflict-of-interest malpractice claims underscores the critical importance of effective conflict detection, management and resolution. By obtaining robust insurance coverage and prioritizing risk management practices, law firms can mitigate the financial and reputational damage caused by conflict-related claims.
Connect with a HUB ProEx Specialist to review your policies and identify opportunities to strengthen your risk management approach. View more articles in HUB’s ProEx Advocate Articles & Insights Directory.
1 Freeman Mathis & Gary LLP, “More claims, bigger losses, new tech risks: Inside the 2026 Annual Lawyer Professional Liability Survey,” June 24, 2026.
2 New York Venture Hub, “Representing the Company, Advising the Founder: The Conflict That Cost Cooley US$25 Million,” August 3, 2026.
3 New York Venture Hub, “The Conflict That Cost Cooley.”
4 Law 360°, “Texas BBQ Restaurateur Sues Cokinos Young Over US$14M Deal," January 4, 2024.
5 The Kassab Law Firm, “Black Market Investments LLC et al. v. Cokinos Young PC et al.,” December 23, 2025.
6 The Kassab Law Firm, “Black Market Investments v. Cokinos Young.”
7 The Kassab Law Firm.
8 The Kassab Law Firm.
9 Reuters, “Dentons Loses Bid to Overturn US$32 Million Malpractice Verdict,” April 28, 2022.
10 Reuters, “Dentons Loses Appeal.”
11 ABA Journal, “Dentons loses appeal to overturn US$32.3M malpractice judgment; verein conflict at issue,” April 29, 2022.
12 ABA Journal, “Baker & McKenzie wins damages in retrial in driller’s US$103M malpractice case,” October 18, 2013.
13 The National Law Journal Abstracts, “Jones Day settles malpractice suit; fraud cause resolved after US$45.6 million jury verdict,” 1996.
14 Hinshaw Law, “Identifying and Resolving Conflicts of Interest: Three Simple Rules,” January/February 2023.
15 Federal Bar Association, “The Federal Lawyer’s Guide to Avoiding Conflicts of Interest,” March 18, 2025.
16 Freeman Mathis & Gary LLP, “More claims, bigger losses, new tech risks: Inside the 2026 Annual Lawyer Professional Liability Survey,” June 24, 2026.
17 American Bar Association, “Model Rules of Professional Conduct, Rule 1.7 Conflict of Interest,” accessed September 24, 2026.
18 Federal Bar Association, “The Federal Lawyer’s Guide to Avoiding Conflicts of Interest,” March 18, 2025.
19 American Bar Association, “Model Rules of Professional Conduct, Rule 1.7 Conflict of Interest,” accessed September 24, 2026.