In the United States, businesses and individuals are largely free to enter into contracts as long as they do not violate any laws or public policy. The attorney-client relationship, however, is unique and typically involves different rights and obligations than those of an average business or nonattorney individual.
Because the attorney-client relationship involves certain duties and obligations on the part of attorneys, there are limitations to what attorneys can include in client agreements. For example, provisions that violate an attorney’s ethical obligations are likely unenforceable. Such provisions also could constitute violations of bar rules, resulting in attorney discipline.
The consequences of violating the bar rules can be severe. It is therefore important to carefully review fee agreements and engagement/retainer letters to ensure that they comport with the rules and regulations governing attorney conduct. Below are a few of the limits on attorney relationships that may create problems in connection with standard fee agreements or engagement/retainer letters.
Attorneys cannot represent just any client who wants to hire them. Generally, there are two types of restrictions.
First, there are prohibitions against conflicts of interest that impact whether an attorney can take on a new client.
Because of the unique fiduciary relationship between an attorney and client, attorneys generally cannot simultaneously represent clients whose interests directly conflict. These are multiple-representation conflicts and are governed by Rule 3-310 of the California Rules of Professional Conduct. Many attorneys mistakenly believe that they 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 typically 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.
Second, although not prohibited, attorneys generally avoid representing clients in matters outside of their expertise. Of course, attorneys with general practices can represent clients in a multitude of areas. But there are some areas of law that may require specialized knowledge and understanding. Taking on such matters could violate the attorney’s obligation of competence and expose the attorney to liability.
Unlike most contracts, which have a specified term of application to which both parties agree, attorney-client agreements are, in many ways, 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, may be unenforceable.
Attorneys are more limited in terms of their ability to terminate the attorney-client relationship. There are detailed rules that specify when an attorney can end an attorney-client relationship, such as Rule 3-700 on terminating a representation. The failure to follow those rules can subject the attorney to discipline, sanctions, and even the risk of a legal malpractice claim in situations in which the client suffers 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, including 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 still be subject to the approval of a court if the client is engaged in active litigation.
There 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 4-200 identifies several factors that determine whether a fee is reasonable, including the amount of the fee in comparison to the value of the services performed, the relative sophistication of the attorney and the client, the difficulty of the questions involved, the required skill to perform the legal services properly, and the experience, reputation and ability of the attorney performing the services.
Second, once the attorney-client relationship begins, there are some additional considerations before a fee can be increased. This is because mid-representation fee adjustments are usually subject to higher levels of scrutiny. On the other hand, there are many routine instances in which a fee may be revised during the course of a representation without such scrutiny, such as a standard annual fee increase.
One step that many attorneys take is to reserve the right to reasonable fee adjustments in the fee agreement or in the engagement/retainer letter.
Many jurisdictions prohibit attorneys from using an agreement with a client to prospectively limit their malpractice liability as a matter of public policy. Nonetheless, attorneys in many jurisdictions, including California, 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.
Focusing on the above issues before it is too late can lead to much better results for attorneys entering into agreements with clients.