Freedom to contract is an important right. Businesses and individuals in the United States are free to enter into contracts as long as those contracts do not violate any laws or public policy.
The attorney-client relationship, however, is unique. There are laws from which attorneys are sometimes exempt, most often because compliance with the law would involve disclosures that violate the attorney-client privilege or confidentiality. On the other hand, there are regulations that impose greater burdens or duties on attorneys than on other citizens.
Because the attorney-client relationship involves distinct duties and obligations on the part of attorneys, there are limitations in what attorneys can include in their agreements with their clients. Provisions that violate an attorney’s ethical obligations are unenforceable, but also could constitute violations of bar rules resulting in attorney discipline.
Because the consequences of violating the bar rules can be severe (including, in some cases, disbarment), it is important to carefully review fee agreements and engagement/retainer letters to make sure that they do not run afoul of the rules and regulations that govern the conduct of attorneys. Below are a few of the limits on attorney relationships that may create problems in connection with standard fee agreements or engagement/retainer letters.
Who an attorney can represent
A store can sell to any customer who wants to buy something. Given the special nature of the attorney-client relationship, and the duties involved in such a relationship, attorneys cannot represent just any client who wants to hire them.
Generally, two types of restrictions exist. First, there are prohibitions against conflicts of interest that affect when and whether an attorney can take on a new client. Conflicts can exist in two kinds of situations: multiple clients and former clients.
Because of the unique fiduciary relationship between an attorney and client, together with the ethical obligations owed to clients, attorneys cannot simultaneously represent clients whose interests directly conflict. These are multiple-representation conflicts and are governed by Rule 1.7 of the Georgia Rules of Professional Conduct.
Many attorneys mistakenly believe that all conflicts of interest can be waived or, put another way, that attorneys can represent clients with directly adverse interests so long as they have been provided full disclosure of the situation and consent to the arrangement.
The reality, however, is that some conflicts can never be waived, regardless of the amount of disclosure or the degree of client consent. On the other hand, if there is only a potential conflict of interest—i.e., the interests of the clients are not currently adverse but could conceivably become adverse—then the attorney or law firm can represent the clients after full disclosure and written consent.
Without informed, written consent from a former client, attorneys and law firms may not accept a representation against a former client in a substantially related matter where the new client’s and the former client’s interests are adverse. No consent means no representation. Rule 1.9.
Second, although not prohibited, attorneys and law firms should avoid representing clients in matters outside of the attorney’s expertise. Certainly attorneys with general practices can represent clients in a multitude of areas. But there are certain specialties that involved nuanced knowledge, such as intellectual property law, tax law or admiralty law, that the average practitioner is not competent to handle. Taking on such matters could violate the attorney’s obligation of competence and expose the attorney to liability.
How much an attorney can charge
With the exception of public utilities, most businesses can sell their product or service for whatever price they can get. Attorneys cannot.
Below are a few limitations in connection with the amount of the fee attorneys can charge.
First, the fee must be reasonable. There is considerable flexibility in determining whether a fee charged by an attorney and agreed to by the client is reasonable. Rule 1.5 identifies several factors that determine whether a fee is reasonable, including the fee customarily charged in the locality, the skill required, the time performed and the experience of the attorney.
Whether a fee charged is reasonable is most often examined in the context of a lawsuit filed by the attorney to collect a fee that a client has refused to pay. A court examining the issue can determine that a fee is unreasonable. Separately, whether a fee charged was reasonable can be the focus of a bar grievance against the attorney. In short, attorney decisions on rates may be reviewed.
Second, once the attorney client relationship begins, it is very difficult to increase the fee. Because a fiduciary relationship already exists, any fee adjustments in midrepresentation will be subject to a very high level of scrutiny. One step that attorneys can take is to reserve the right to reasonable fee adjustments in the fee agreement or the engagement/retainer letter. Even then, however, the extra scrutiny will still apply.
How Long the Agreement Can Last
Unlike most contracts, which have a specified term of application to which both parties agree, attorney-client agreements are one-way streets. Clients can terminate the attorney-client relationship at any time for any reason. Provisions in fee agreements that purport to specify a term of performance, against a client’s wishes, are simply unenforceable.
On the other hand, attorneys cannot terminate the attorney-client relationship at any time for any reason. Instead, there are detailed rules that specify when and how an attorney can end an attorney client relationship, such as Rule 1.16 on declining or terminating a representation. The failure to follow those rules can subject the attorney to discipline, sanctions and even the risk of legal malpractice should the client suffer harm as a result of the improper withdrawal.
One thing that attorneys can do to ease any potential withdrawal is to identify grounds in the original agreement with the client that detail circumstances in which both parties agree the attorney may seek withdrawal. Such circumstances can include some of the more common reasons that attorneys seek mid-representation withdrawal such as the failure to timely pay fees or expenses; the inability to communicate or locate the client; or the refusal of the client to abide by or follow the attorney’s advice.
Notably, however, even when an attorney and client agree on potential terms for withdrawal, withdrawal may be subject to the approval of a court if the client is engaged in active litigation.
Limits on liability
Many jurisdictions prohibit attorneys from using an agreement with a client to prospectively limit their liability. This is because courts recognize that limiting an attorney’s exposure for malpractice at the beginning of the representation is contrary to public policy. Nonetheless, attorneys in many jurisdictions, including Georgia, are permitted to include mandatory fee arbitration in their agreements with clients. This is because fee arbitration simply determines how a fee dispute will be resolved; it does not limit the attorney’s liability for malpractice or guarantee fee recovery.
Many of the above issues are not given their due consideration until it is too late. Therefore, if existing fee agreements or engagement letters violate any of the limitations on attorney-client agreements as discussed here, the attorneys should work with the client to replace them. Leaving improper agreements in place involves too much risk.
As published by American Lawyer Media