In Cox v. Alliant Insurance Services, Inc., 2017 WL 4640452 (E.D. Wash. Sept. 19, 2017) (unpublished), the plaintiffs sought to disqualify the opposing law firm based on a conflict of interest. One of the plaintiffs argued that he was a former client of the firm on a substantially related matter, necessitating the law firm’s withdrawal.
The plaintiff’s contact with the firm was as a representative for a corporation. In concluding that no attorney-client relationship existed between the plaintiff and the law firm, the court relied on two key points:
The law firm and corporation executed a written engagement agreement that identified the corporation (and not the individual) as the client in the matter.
The plaintiff failed to introduce contradictory evidence, i.e., he could not point to any communication or action by the firm which expanded the attorney-client relationship to include him individually as a client.
As we discussed in the CLE, Limiting Exposure to Conflicts, identifying your client and clarifying the client’s status (prospect, current client, or former client) is paramount to conflict screening and limiting your potential liability. The single best tool at your disposal? Written engagement, disengagement, and nonengagement letters – all of which are available at the Professional Liability Fund website.
But the law firm inCox didn’t stop at the engagement letter. Firm members were also consistent in their actions toward the corporate representative. There was no evidence of emails, correspondence, or other communication supporting that the corporate representative was an individual client of the firm.
The moral of the story? A solid engagement letter is a small investment to make in the realm of thwarting conflicts and liability. Even better: maintaining consistency in your corporate communications.
On November 1 you meet with Jane Client. You have a good feeling about Jane and her case. She is definitely someone you want to represent. After the meeting, you send Jane a standard fee agreement/engagement letter. You tell Jane that you will need documents and additional information to proceed. You also explain that Jane must establish a retainer of $2500 before you begin work on her case. On November 3, Jane sends you an email with the required documents. Four days later, she provides the additional information you requested. On November 8 you and Jane speak over the phone. On November 10 Jane sends you a check for $2500.
Clients Like Jane are Tempting…
Jane is a very appealing client. You have good rapport and confidence in her case. She is cooperative, responsive, and paid your retainer. So what’s not to like? If you proceed to represent Jane (or let’s be honest: if you continue representingJane), you do so under substantial risk. How can that be? Let’s explore some of the issues that come to mind:
The Perils of Unsigned Fee Agreements and Engagement Letters
No enforceable written contract. I wouldn’t want to be without one. I’m not saying all hope is lost collection-wise, but you certainly have a far tougher row to hoe without the client’s signature on a written agreement. Fee agreements should always be in writing, countersigned by the client, regardless of the practice area.
No proof of scope of representation. This could lead to several problems: demands by the client that you provide additional, unintended services; liability exposure for unanticipated (but arguably related) services; or inability to withdraw as attorney of record before an agency or tribunal.
Voidable fees in contingent cases. ORS 20.340(1)(a) provides that all contingent fee agreements “shall be written in plain and simple language reasonably believed to be understandable by the plaintiff.” In addition, a model explanation of the contingent fee agreement is required. ORS 20.340(1)(b). “Any contingent fee agreement entered into on or after September 26, 1987, that does not comply with the requirements of subsection (1) of this section is voidable. [Formerly 9.400]”
Ethics complaints related to flat or fixed fees paid in advance. Oregon RPC 1.15 and 1.5, together with Oregon Formal Opinion 2005-151, describe a specific set of conditions for “earned upon receipt fees,” the most basic of which is that such arrangements must be in writing. No exceptions.
Fixing the Problem
Since Jane is otherwise an ideal client it should be easy to pick the phone and have a conversation about the necessity of signing and returning your fee agreement and engagement letter. It is possible she simply overlooked your paperwork. You may also learn that your fee agreement or engagement letter is too long or too complicated.
If you are asking the client to sign an “earned upon receipt” fee agreement after the fact, consult with private ethics counsel or contact OSB General Counsel before proceeding: “Without a clear written agreement between a lawyer and a client that fees paid in advance are earned on receipt, such funds must be considered client property and are, therefore, afforded the protections imposed by Oregon RPC 1.15-1. In re Biggs, 318 Or at 293 (discussing former DR 9-101). If there is a written agreement with the client that complies with the requirements of Oregon RPC 1.5(c)(3), the funds belong to the lawyer and may not be put in the lawyer’s client trust account. If no such agreement exists, the funds must be placed into the trust account and can only be withdrawn as earned. See, e.g., In re Hedges, 313 Or at 623–24; OSB Formal Ethics Op No 2005-149.” OSB Formal Opinion 2005-151.
Going forward, streamline your engagement/fee agreement procedure.
Give the client a heads-up about the importance of signing and returning your agreement/engagement letter during the client meeting. Let the client know to expect the letter, what it will say, and why it must be signed before you can proceed. Encourage clients to call with any questions or concerns.
Consider presenting the fee agreement or engagement letter to the client as part of the client meeting [not my personal favorite, but it is an option] – or – experiment with eSigning. Services like DocuSign are simple, easy, and secure. Another option? A click-wrap agreement.
If you use surface mail, consider enclosing a stamped, self-addressed return envelope). Be sure to include an extra copy of the agreement for the client’s records.
Set a date to follow-up with the client about returning your agreement and enter the follow-up date in your calendaring system. If the agreement is not returned by the date specified, contact the client.
Solicit client feedback about other changes you can make to improve return of signed fee agreements and engagement letters.
Make it Easier for You and the Client
Clients want agreements that are short, simple, and understandable. This presents a challenge because we are tempted to cover every contingency in great detail. Odds are your fee agreement has room for improvement when it comes to use of Plain English, and room to spare when it comes to verbosity.
Consider this option: Instead of devoting a page of your fee agreement to the subject of billing, enclose a separate one page bullet list of “Billing Practices” describing when/where/how you bill. While technically a “cheat” (you just added another page), it will shorten the actual agreement while giving the client the information they need in a more understandable format.
Or if you prefer not to add another physical page, send the client a link to the billing practices section of your website. (Which can be a stand-alone page not visible in your navigation menu.)
This concept – enclosing a bullet list or providing a link to content on your website – can be applied to other issues covered in a typical fee agreement/engagement letter. Using this approach should not jeopardize the viability of your contract or collection of accounts if you use language that incorporates the referenced practices as part of your agreement. Be sure to use effective dates on any enclosures or web pages and retain links to archived firm policies or procedures. If you choose to transition content in this manner, do you own research on enforceability/viability.
Over the last few weeks I’ve reported on the presentations given at the first ever Solo & Small Firm Conference in Bend, Oregon. As noted previously, the lineup included several Oregon-based experts, including the incomparable David Elkanich of Holland & Knight.
David was the closer on day one, and conference organizers couldn’t have chosen a better speaker. The topic: Legal Ethics for the Solo and Small Firm Practitioner.
David touched on client screening, fee agreements, engagement/disengagement/nonengagement letters, referral fees, data privacy and security, use of contract lawyers, supervision of lawyer and non-lawyer staff, IOLTA, mobile devices, and office sharing. Click here to see a complete review of David’s spot-on advice.