Legal ethics require lawyers, almost always, to give new clients a writing; that writing is usually called an engagement letter.
Do Litigators Need Engagement Letters? In Cohen v. Jaffe, Raitt, Heuer and Weiss, P.C., 768 F. App’x 440 (6th Cir. Apr. 5, 2019), the law firm could not have been liable for legal malpractice unless the firm had an attorney-client relationship with an entity related to the firm's client. The firm presented evidence that it did not even know the related entity existed. The jury, nonetheless, found the firm liable for $1.7 million. The Sixth Circuit upheld the verdict, noting that the firm had “never sent a written engagement letter setting out exactly whom the firm represented.” So, yes, even without considering ethics requirements, litigators need engagement letters.
What Ethics Rules Apply to Engagement Letters? Lawyers' ethical rules, including the law governing engagement letters, are state-specific. All states, including California as of November 1, 2018, have adopted a version of the ABA Model Rules of Professional Conduct.
For engagement letters, check the relevant state’s law which often will be Rule 1.5 (Fees) and, at times, might include Rules 1.4 (Communication), 1.7 (Conflict of Interest: Current Clients), 1.8 (Conflict of Interest: Current Clients: Specific Rules), and possibly others. Also, check state advisory opinions, including those mentioning Rule 1.5. In a small minority of states, check statutes or court rules, especially as to fee agreements.
What Terms Must Litigators Include in Engagement Letters? Ethics rules require a lawyer to include certain terms in the engagement letter:
Identify the Client. An engagement letter should carefully and specifically identify the client(s). As an aside, a separate “I’m not your lawyer” letter, at times, can avoid misunderstandings.
Confirm the Scope of the Engagement. Under Model Rule 1.5(b), a lawyer must communicate to the client the scope of the representation. Under Model Rule 1.2(c), a “lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” Some state versions of Rule 1.2 require written consent to such scope limitations. ABA Formal Opinion 472 (Nov. 20, 2015) advises “lawyers providing limited-scope representation [to] confirm the scope of the representation in writing provided to the client.”
Paying Fees and Expenses. Under Model Rule 1.5(b), a lawyer must communicate to the client the basis or rate of the fee and expenses for which the client will be responsible “preferably in writing, before or within a reasonable time after commencing the representation.” If the lawyer regularly represents the client on the same basis or rate, this requirement does not apply.
Changes in the Fee Agreement. If a fee agreement might be changed, see ABA Formal Op. 11-458 (Aug. 4, 2011). Under Model Rule 1.8(a), changes in a fee agreement may require notice to the client that he should seek independent legal advice.See In re Curry, 16 So. 3d 1139 (La. 2009) (upholding three-month suspension of lawyers for changing from one-third contingency to fee agreement that allowed lawyers to recover even if no recovery).
What Should an Engagement Letter to Multiple Clients Include? Litigators often represent more than one client in the same matter. For such cases, each client should sign the same engagement letter with the following:
Consent to Conflicts. Under Model Rule 1.7(b)(1-3), a lawyer cannot represent clients with a concurrent conflict of interest if (1) the lawyer would not be able to provide competent and diligent representation to each affected client, (2) the lawyer is prohibited by law from the joint representation, or (3) one client has a claim against another client in the same litigation. Under Model Rule 1.7(b)(4), a lawyer otherwise can represent clients with a concurrent conflict of interest if the lawyer has informed consent confirmed in writing from each client waiving the conflict. The engagement letter should address any existing conflicts, possible future conflicts, and waivers of conflicts. For waiving conflicts, the Commentary to Model Rule 1.7 outlines a four-step process: (1) identify the potential clients, (2) determine whether a conflict exists, (3) determine whether the potential clients can consent to the conflict, and (4) either obtain the consent or decline the representation.
Documenting Multiple Representation. When a litigator represents multiple clients, consider adding the following to the engagement letter: (1) whether and how to share confidential information among co-clients, (2) how to divide fees and expenses, (3) how to make decisions that require client involvement, and (4) how the lawyer, if necessary, might withdraw from representing some or all clients.
What Other Terms Might Litigators Include in Engagement Letters? A litigator should consider adding the following terms to the engagement letter:
Confirm Client’s Limiting Instructions. If a client tells a lawyer not to do something that might be considered legal work, the lawyer should document those instructions, preferably in a writing signed by the client. For example, a client might tell a litigator he is only serving as local counsel and is not otherwise responsible for a matter.
Client Responsibilities. A lawyer should consider including client responsibilities in the engagement letter: (1) be truthful and provide all available information, (2) preserve evidence, including electronically stored information, (3) put insurers on notice, (4) cooperate and be available when needed, (5) when and how to communicate with the lawyer (e.g., telephone, email, text), (6) update changes in contact information promptly, and (7) inform the lawyer of any changes that could affect the representation.
Miscellaneous. Additional issues to consider adding to an engagement letter include the amount of any retainers and how retainers are to be treated, handling of client funds (e.g., deposit in a trust account), third party liens (e.g., subrogation and reimbursement claims), and litigation funding by third parties.
Conclusion. For any litigator, not having an adequate engagement letter can lead to problems, including ethics violations, not recovering fees, and malpractice claims. A well-drafted engagement letter can help manage these potential problems and risks.
