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The ethics of refusing business and parting company with a client

Attorney-client relationships can get mighty tenuous. And either side can be at fault.

Here are three issues that cause great concern: Turning down a prospect, firing a client, and getting fired by a client.
They are explained by Michael Downey, a partner with Armstrong Teasdale in St. Louis whose practice focuses on professional legal, risk management, and ethics issues. Downey is also chair-elect of the American Bar Association’s Law Practice Management section.

No, we don’t want their business

First is the issue of rejecting the business a prospect offers.

It’s not as easy as it appears, Downey says. It’s not enough to say, “thanks, but no thanks,” and show the prospect the door. The turn-down needs to be in writing. The risk is that the prospect will get a different interpretation of the conversation and walk out thinking the attorney is hired.

There needs to be a letter saying the obvious: that the firm is not accepting the work. But the letter also needs to be clear that the firm is not rejecting the matter on its merits and that another attorney may want to handle it.

If a statute of limitations applies, mention it, but only generally. Don’t cite the length of time. That’s legal advice, and giving advice can inadvertently create a client relationship, he says. What’s more, the advice might not be correct. There could be other time limitations the attorney is not aware of, and the prospect could suffer harm as a result.

Safest is to say “if you decide to pursue this matter, you need to talk to another attorney right away because there may be a statute of limitations that applies.”

Don’t tell me too much

Related to that is the question of how much information to collect from the prospect before making a decision to accept or reject the work.

The answer is no more than the basics, Downey says. Then run a conflicts check and only then decide if the firm wants to gather more information.

In many cases, that’s easy to do, he says. If somebody calls about a lawsuit, say “send me a copy of the complaint and I will run a conflicts check.” And at the same time, tell the client “Don’t share any confidences with me. Just tell me what you’d be willing to share with your neighbor.”

When somebody does share a confidence, the attorney has an obligation to keep the information confidential even if the individual doesn’t hire the firm.

Best practice is to stay away from information that’s not in the public record, such as the prospect’s concerns about the case or elements the prospect thinks might win or lose the case.

In most jurisdictions, if an attorney receives only basic information about a matter and then turns it down, the firm can represent the adverse party in that same matter. But not so if the attorney gets more than the basics.

Client, you have to go

The second issue is dismissing a client before a matter is concluded, and that, Downey says, is a twopronged matter: when the attorney must dismiss a client versus when the attorney may dismiss a client.

On the must-dismiss side, there are some situations where the attorney has no choice but to withdraw, and those are covered by American Bar Association as well as state bar association rules.

In general, an attorney must dismiss a client who is asking for something unethical or illegal. A client must also be dismissed when the attorney’s mental or physical condition is impaired, as when the attorney has a drug addiction, a health issue, or personal stress that affects the work. And, of course, the client can discharge the attorney.

On the may-dismiss side, however, an attorney can choose to end the relationship for a number of reasons – perhaps the client has lied, is uncooperative, or doesn’t pay the bill.

Even so, it’s not always easy to do.

If it’s a litigation matter, for example, the attorney needs court approval. And if the court denies the request, perhaps because it comes in too close to a trial date, the attorney has to continue the representation.

Also, the attorney needs to be able to show that the client was on notice that a resignation was possible. If the resignation is because the client hasn’t paid the bill, for example, there needs to be a written notice of “if you don’t pay by a specific time, I will be forced to withdraw.”

If the court is involved, it will want to see that the attorney gave the client adequate warning.

The attorney also needs to protect the client’s interest by giving guidance on what’s going on with the file and what deadlines apply.

And more, the attorney has to provide enough time for the client to find other representation. It’s not permissible, for example, to send the withdrawal notice a week before a filing deadline, Downey says. “Get an extension on it, and then withdraw.”

Attorney, you have to go

The third issue is how to respond when the client dismisses the attorney.

Take care, Downey says. Stay calm. The natural response to getting fired is anger, and many an attorney blasts off a scathing letter to the client who responds in kind with a scathing malpractice claim.

There needs to be a letter to the client confirming the termination, but keep it dispassionate. And to ensure dispassion, he says, “prepare one letter and then throw it away and write another one.”

The letter should say no more than “This is to confirm that you have terminated our representation. Please be aware that you owe us $X. And please let us know what to do with the file.”

Then keep a copy of the file as protection against any malpractice claim that might arise. And also notify the malpractice carrier of the split.

On the positive side, he says, with contingency matters, getting fired isn’t always so bad. If the client fires the attorney before the payment comes in, the attorney still has a right to the fee. And the firm has a better chance of getting paid if it has been fired than if there is question that it abandoned the client.

Holding the file hostage

Once fired, can the firm hold the file until the client pays the bill in full?

In most jurisdictions, no, Downey says. The general rule is that whether the bill is paid or not, the file belongs to the client.

There is a small exception, however, and it is records created by third parties that haven’t been paid for. Those are things such as a court reporter’s transcript of a deposition. Some states allow an attorney to require payment for those expenses before turning the file over.

But legal or not, it’s dangerous to do so, because it’s easy to claim the lawyer held the file wrongfully and the client was harmed as a result. It’s a risk management issue.

“That’s why it’s important to watch if clients haven’t paid in a while,” he says. They can fire the attorney and take the files and leave the firm with unpaid bills.

Related reading:

How to calm down the angry client and hold on to the business

How and why you need to carefully screen cold calls from potential new clients

Just common sense can ward off disciplinary and malpractice actions









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