by Scott B. Garner
Lawyers often counsel their clients to put everything in writing. Yet, far too often, lawyers do not take their own advice. And no times is it more important for a lawyer to document her agreement with a client than at the beginning and end of a representation. This is true not just for ethical and legal reasons, but also for practical, loss prevention reasons.
Engagement Letters
Most lawyers are familiar with Business and Professions Code section 6148, which governs the circumstances under which a lawyer is required to provide a written engagement agreement to a client. Specifically, Section 6148 requires a lawyer to document in writing her agreement to represent an individual where the total expense to the client, including attorneys’ fees, “will exceed one thousand dollars ($1,000).” Bus. & Prof. Code § 6148(a). There are several exceptions to this mandate, the most notable being that a lawyer generally is not required to enter into a written fee agreement with a corporate client. Id. § 6148(d)(4).1
Another notable exception is where the lawyer previously had a written engagement agreement with the client, and the new engagement is “of the same general kind as previously rendered to and paid for by the client.” Id. § 6148(d)(2). Thus, where a lawyer represents an individual in one matter, and then takes on a second matter of a similar nature for that same individual, the lawyer is not required to enter into a second written engagement agreement.
Contingency fee agreements are a whole different animal, and they not only require a written engagement agreement (whether the client is an individual or a corporation), but expressly require certain information to be included in the agreement. Contingency agreements must include the contingency fee rate, how disbursements and costs will impact the fee and the client’s recovery, and the fact that the contingency fee is negotiable. Id. § 6147(a).
Failure to comply with Section 6147 or 6148 can have harsh ramifications for the lawyer, including the inability to collect the agreed-upon fee. Specifically, both Sections 6147 and 6148 provide that failure to comply makes the agreement voidable at the option of the client, leaving the lawyer able to recover only a “reasonable fee.” Often the “reasonable fee” will be argued by the client, and may be found by a court or arbitrator, to be less than the fee the lawyer was expecting to recover.
But, as with most things in life, just meeting the minimum standards is not sufficient. That is, “good enough” is rarely good enough. Rather, whether or not required under the Business and Professions Code, lawyers, except in rare circumstances, should utilize written engagement agreements to set forth the terms of their representation. Doing so is likely to avoid problems down the road—particularly if a dispute arises over the representation.
Many legal malpractice lawsuits turn on the scope of the lawyer’s duties. For example, a corporate lawyer may be hired to prepare the deal documents, but not to conduct the due diligence necessary for the client to decide if everything is as it appears. When the deal goes south because something that could have been uncovered in due diligence was not, the client may be tempted to point a finger at the lawyer notwithstanding their mutual oral understanding that the lawyer was not going to perform any due diligence. Similarly, a litigator may agree to assess a case and perhaps engage in some pre-filing settlement negotiations, but not to actually litigate the case. If that is not made clear, the lawyer may find herself having to seek permission from the court to withdraw from a matter she never intended to litigate. If the lawyer’s understanding of the scope of her engagement is not memorialized in writing, the client may remember things somewhat differently. Indeed, absent a written, narrowed scope of representation, a client suing his lawyer for legal malpractice is likely to “remember” that the lawyer was going to do pretty much everything for him.
A favorite claim of malpractice plaintiffs these days is that a lawyer who took over a case from another lawyer failed to advise them of the statute of limitations for suing the first lawyer. And the case on which they most heavily rely is Nichols v. Keller, 15 Cal. App. 4th 1672 (1993). In Nichols v. Keller, the lawyer expressly limited the scope of his engagement to only cover a workers compensation claim against his injured client’s employer and its workers compensation insurer. The lawyer did not say he would or would not advise the client about potential third-party claims and, in fact, did not advise the client about a potential third-party claim. By the time the client learned he had a potential third-party claim, the statute of limitations on such a claim already had run. The client eventually sued his workers compensation attorney for legal malpractice for, among other things, failing to advise him about either a potential third-party claim or the statute of limitations on such a claim.
The trial court granted the lawyer’s motion for summary judgment, but the court of appeal reversed. The court of appeal reasoned that the lawyer was in a better position than the nonlawyer client to know about a potential claim against the third party and to evaluate the statute of limitations for such a claim. It concluded that the lawyer had a duty to advise the client about the potential claim, notwithstanding that the lawyer undertook only to pursue a workers compensation claim.
The lesson of Nichols v. Keller, then, is that it not only is prudent to describe the scope of the work you are going to do, but also to describe the work you are not going to do. If the lawyer in Nichols v. Keller had expressly told his client, in writing, that he was not advising him about a potential third-party claim, and that he was not advising him what the statute of limitations on such a claim was, then the case likely would have come out differently. Thus, following this logic, when a lawyer takes over a case from another lawyer, the second lawyer should tell the client in writing—which may as well be, but doesn’t have to be, in the engagement agreement—that she is not advising the client about a potential claim against the first lawyer, including whatever the statute of limitations might be on such a claim.
Carefully defining the scope of the lawyer’s representation is not a panacea for avoiding legal malpractice claims, but it will limit or preclude at least some of the claims, and will put the lawyer in a better position to defend many claims that still might be brought.
“I’m Not Your Lawyer” Letters
Just as it is important to tell a client, in writing, the terms of a representation, including the scope of the representation, so too is it important to tell some potential clients that you are not representing them—the so-called “I’m not your lawyer letter.” Whenever you meet with a potential client, but do not take on the matter, you want to ensure as best you can there is no confusion about whether you are representing that potential client. For example, suppose a potential client comes to the office inquiring about a breach of contract lawsuit based on a breach that arguably occurred almost four years ago. If you end up not taking on the representation, the prudent course would be to remind the client that you are not their lawyer, that they might have a statute of limitations issue, and that you are not analyzing it for them.
Similarly, suppose a husband and wife come to your office to engage you regarding their business venture. Suppose, further, that based on certain conflict issues, you end up representing only the husband. To the extent there is any uncertainty—and even if there doesn’t appear to be—the prudent course is to tell the wife, in writing, that you are not her lawyer.
Termination Letters
Finally, as all good things must come to an end, so too must even the most successful and satisfying representations come to an end. And this is where many lawyers fall short in their efforts to protect themselves with a simple writing. When a representation ends, it is good practice to write a termination letter making it clear that the representation is over—even though nothing in the Rules of Professional Conduct or the State Bar Act requires one. That is so even if you continue to represent the client on other matters. And it does not have to be a formal letter; even a one- or two-sentence email, or a short note with a final invoice, could suffice. “Thank you for the opportunity to represent you on this matter. This concludes the matter, but I look forward to opportunities to work with you again in the future.” This type of termination letter serves several functions.
First, it erases any confusion—legitimate or otherwise—that a client may have about whether her interests are still being proactively protected by the lawyer. It is not that unusual for a client to sue a lawyer for malpractice based on the lawyer failing to do something that the lawyer had no idea the client expected her to do.
Second, depending on other factors, it may start the running of the one-year statute of limitations on a potential malpractice claim—a statute that is tolled as long as the lawyer continues to represent the client on the same matter. This is particularly important if there is any risk the client may not pay all outstanding invoices, thereby requiring the lawyer to initiate a collection action against the client (which a lawyer almost never wants to do before the one-year statute of limitations on the malpractice claim expires) .
Third, it allows the lawyer to take on a new matter potentially adverse to the now-former client, provided the two matters are not substantially related.
Conclusion
The ethical rules and state law require written engagement letters in some, but certainly not all, circumstances. They do not expressly require “I’m not your lawyer” letters or termination letters. Yet, good practice mandates going beyond the minimal ethical and legal requirements. That means always (or nearly always) preparing a written engagement letter setting forth, among other things, the scope of the representation (including what the representation does not cover). It also means, where there is any likelihood of confusion after meeting with a potential client, sending that potential client an “I’m not your lawyer” letter, as appropriate. And, finally, good practice means documenting the end of a representation with a writing so there is no confusion about the fact or timing of the termination.
ENDNOTE
Scott B. Garner is a partner at Umberg/Zipser LLP in Irvine, California, where he practices complex business litigation, with a focus on lawyer liability and legal ethics. He is the 2020 President of the Orange County Bar Association and the Co-Chair of the OCBA Professionalism and Ethics Committee. He can be reached at sgarner@umbergzipser.com.