by Cathy Tran Moses
ABA Model Rule 1.16 allows an attorney to withdraw from representing a client if the withdrawal “can be accomplished without material adverse effect on the interests of the client.” This permissive ground for withdrawal under the Model Rule is not included within California’s articulation of Rule 1.16; however, California’s Rule 1.16 prohibits lawyers from terminating representation on any grounds without taking “reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client.”
On April 2, 2025, the ABA Standing Committee on Ethics and Professional Responsibility: (the “Committee”) issued an opinion, Formal Opinion 516, to provide guidance regarding when a “material adverse effect” to a client’s interest may occur and identifying circumstances that attorneys should keep in mind if they are considering withdrawing from a current representation on these grounds. See ABA Comm. on Ethics & Prof. Responsibility, Formal Op. 516 (2025) (the “Opinion”). While that precise language is not part of California’s Rule 1.16, what constitutes a “material adverse effect” under the Model Rule may shed light on what may constitute “reasonably foreseeable prejudice” to the interests or rights of the client and the factors lawyers should consider in analyzing that question.
When Material Adverse Effect Is Likely to Occur Rule 1.16(b) provides several circumstances when a lawyer may withdraw from representing a client, including if the client insists upon taking action that the lawyer “considers repugnant” or if other good cause exists for withdrawal. Another basis on which an attorney may withdraw from a representation is recognized in Rule 1.16(b)(1): if the “withdrawal can be accomplished without material adverse effect on the interests of the client.”
Formal Opinion 516 focuses on what “material adverse effect” means. First, the Committee makes clear that “material adverse effect on the interests of the client” could occur if the lawyer’s withdrawal would significantly harm the client’s interests in the matter in which the lawyer represents the client: if the lawyer’s withdrawal would result in significant harm to the forward progress of the client’s matter, significant increase in the cost of the matter, or significant harm to the client’s ability to achieve the legal objectives that the lawyer previously agreed to pursue in the representation.
Some examples where material adverse effect could arise are if a transaction is near its end, and no substitute attorney is available who can complete the work on a timely basis; if the attorney has a unique set of skills that cannot be easily replaced; or if the client has to incur unnecessary, duplicative expense if successor counsel is expected to charge fees to duplicate other work. The Opinion offers potential solutions if such circumstances arise, including if the withdrawing lawyer assists the new attorney to get up to speed on the matter, or returns legal fees for work that will have to be duplicated.
The Opinion also recognizes circumstances when material adverse effect to the client would be unlikely. For example, if a representation has only just begun and minimal work has been done for the client; or if a client has multiple counsel and the withdrawing lawyer has substantially completed the work assigned, it is unlikely that withdrawal would harm the client. The Opinion calls out the example of attorneys who provide tax or estate planning services. Even though there may be an implied expectation by clients to use their services in the future, if the lawyer has completed all assigned work up until that point in time, having to hire a new lawyer is not likely to have a material adverse effect. A client’s disappointment in having a different lawyer provide services, and not a chosen attorney, does not constitute a “material adverse effect” that would prohibit withdrawal.
The Opinion also makes clear that when the attorney seeks to withdraw under Rule 1.16(b)(1), the attorney should provide the client an explanation for withdrawing subject to rules of confidentiality, but is not required to satisfy the client with such explanation.
The Opinion’s Discussion of the “Hot Potato” Doctrine In addition, the Opinion states that when a lawyer permissively withdraws under Rule 1.16(b)(1), his or her motivation for doing so is irrelevant. Thus, a lawyer can withdraw under the Model Rule for any reason, such as reducing the lawyer’s workload, so long as no material adverse effect accrues. This is not the case under California’s Rule 1.16.
The Committee recognizes that this rule could be seen as being in tension with the “hot potato” doctrine. A lawyer can be disqualified from ending the representation of one client in order to pick up the representation of a new, and potentially more lucrative, client whose interests are adverse to the former client. See Picker Int’l, Inc. v. Varian Assocs., Inc., 670 F. Supp. 1363, 1365 (N.D. Ohio 1987), aff’d, 869 F.2d 578 (Fed. Cir. 1989). The doctrine is grounded upon the lawyer’s duty of loyalty to the client.
The Opinion notes that the hot potato doctrine is not contained within Rule 1.16 or another rule of professional conduct, but instead is an “extension of the common law duty of loyalty and the need to preserve public confidence in the bar.” However, while it may not be a violation of Rule 1.16 or a professional rule of conduct for a lawyer to “drop” a client and perform services for the other party that are unrelated to the matter, a court may see things differently based on what has occurred, and may choose to disqualify attorneys who appear to be engaging in “hot potato” conduct.
An Unusual Dissent In a rare dissent, two members of the Committee submitted a short partial dissent to the Opinion. The problem with the Opinion, from the dissenters’ perspective, is that it was incomplete, because it should have provided more helpful and practical guidance. The dissenters stated that the Opinion could cause more attorneys to believe that they need not close client files when a representation is done, when clearly terminating at the end of a matter would or could limit conflict issues and limit ethical duties.
The dissenters also stated that the portion of the Opinion dealing with the hot potato doctrine was “incomplete, and thus also incorrect.” The Opinion did not answer the important question of whether terminating a client for the purpose of later filing for another client would be considered a “material adverse effect” on the interests of the client being dropped. The dissenters also contended that the Opinion’s discussion of the hot potato doctrine should have addressed Rule 1.16(a)(1), which requires a lawyer to withdraw from a representation if the representation would result in a violation of the Rules of Professional Conduct or other law. The dissenters also stated that the Opinion should have discussed the hot potato doctrine in the transactional context, rather than focusing on litigation scenarios.
Takeaways Again, California’s Rule of Professional Conduct 1.16 does not contain the same “material adverse effect” provision that is included in Model Rule 1.16(b)(1). However, the guidance provided by the ABA’s recent Opinion may remain relevant to California lawyers. The California Rule states that if other grounds for withdrawal exist (if, for example, the client’s conduct makes it unreasonably difficult for the attorney to carry out the representation, see Cal. Rules of Pro. Conduct, Rule 1.16(b)(4), or if the lawyer’s physical or mental condition renders it difficult for the lawyer to carry out the representation, see Cal. Rule of Pro. Conduct, Rule 1.16(b)(8), the lawyer is not permitted to terminate the representation “until the lawyer has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client,” such as giving the client sufficient notice to retain other counsel, and releasing at the client’s request the client’s materials or property and promptly returning fees or expenses that have not been earned or incurred. See Cal. Rules of Pro. Conduct, Rule 1.16(d). Thus, while a lack of “material adverse effect” to the client’s interests is not a sufficient ground for an attorney to withdraw in the State, California lawyers who are considering withdrawing for other reasons must remain vigilant against “reasonably foreseeable prejudice” that might accrue to the client as a result of the withdrawal.
The Opinion and Model Rule 1.16 also are important to keep in mind because California considers the Model Rules relevant when there is uncertainty in California law. California Rule 1.16(b)(10) permits an attorney to withdraw from a representation if the attorney “believes, in good faith, in a proceeding pending before a tribunal, that the tribunal will find the existence of other good cause for withdrawal.” Thus, if a California lawyer can show that he or she has taken steps consistent with the guidance of the Opinion such as seeking to terminate very early in the case, or in a manner that allows successor counsel to take over the matter smoothly, the lawyer may consider citing to the Opinion to help support that he or she in good faith believes that there would be good cause for withdrawal.
Finally, while the Opinion and dissent diverge when it comes to the hot potato doctrine, their discussion of the issue and its potential interplay with Model Rule 1.16(b)(1) and the other rules of professional conduct serves as a useful reminder to attorneys of the various considerations and consequences that are implicated when considering withdrawal. California courts have recognized the existence of the hot potato doctrine. Attorneys thus should carefully think through the optics and ramifications of potentially switching sides. They should consider not only whether the impact on the soon-to-be former client allows withdrawal under California’s Rule 1.16 or other applicable rules of conduct, but also whether other rules of conduct, or governing case law, may be implicated under the circumstances, and how courts may view such conduct.
Cathy Tran Moses is a litigation partner in the Irvine office of Cox Castle & Nicholson LLP, and specializes in business litigation and real estate disputes. She is a member of the OCBA’s Professionalism and Ethics Committee, and can be reached at cmoses@coxcastle.com.