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NEW YORK STATE BAR ASSOCIATION
Committee on Professional Ethics
Opinion #
719 – 07/28/1999
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Topic: Retainer agreement; Domestic relations matters; Withdrawal from
employment.
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Digest: Improper for lawyer to utilize retainer agreement in domestic
relations matter which misleads client regarding circumstances under
which lawyer may withdraw for nonpayment or other reasons.
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Code: DR 2-102(A)(1), 2-110, 7-106(A); EC 7-7, 7-8.
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QUESTION
May a lawyer utilize a domestic relations retainer agreement
which includes the provisions discussed below by which the client
consents in advance that certain specified grounds, including
nonpayment, will permit the lawyer to withdraw from the
representation?
OPINION
1. Background: Proposed Retainer
Agreement
Part 1400 of the Rules of the Appellate Division expressly
requires any attorney representing a party in a domestic relations
matter to “execute a written agreement with the client setting
forth in plain language the terms of compensation and the nature of the
services to be rendered.” 22 NYCRR
§1400.3. The same rule expressly
requires the agreement to set forth “under what circumstances the
attorney might seek to withdraw from the case for nonpayment of
fees.” It does not require the
attorney to identify other possible grounds for withdrawal, nor does it
specify the precise language to be included in the retainer
agreement.
The inquirer proposes to utilize a domestic relations retainer
agreement which includes the language quoted below.
1. The client shall not bring legal action, conduct a defense or
assert a position in litigation or take steps merely for the purpose of
harassing or maliciously injuring any person or
entity. The client shall not persist in
a course of action or conduct which is illegal, criminal or fraudulent
or use or attempt to use the Law Firm’s services to perpetrate a
crime or fraud. The client acknowledges
and agrees that such conduct shall be good cause for the law firm to
withdraw its representation and the client hereby consents that the law
firm may so withdraw under such circumstances upon notice to the
client.
2. The client also agrees to follow all instructions and advice
which bear upon ethical, strategic or tactical considerations or matters
made after discussion and agreement with the Law
Firm. In the event that the client
fails or refuses to follow such advice or instructions of the firm in
any respect and/or engages in other conduct which renders it
unreasonably difficult for the firm to carry out employment for the
client effectively, the client acknowledges and agrees that such
failure, refusal and/or conduct shall be good cause for the Law Firm to
withdraw its representation. The client
reserves the right to present any defenses to said withdrawal of the Law
Firm from representation upon these grounds.
3. While no expert shall be retained without the client’s
prior approval, if the client refuses or fails to engage the experts
recommended by the Law Firm, the client acknowledges and agrees that
such refusal or failure would represent a serious conflict within the
attorney client relationship and would render it unreasonably difficult,
if not impossible, for the law firm to carry out employment effectively
and would therefore be good cause for the Law Firm to withdraw its
representation. The client reserves the
right to present any defenses to said withdrawal.
4. In the event that any bill remains unpaid beyond such 30 day
period, or the client fails or refuses to execute an Amendment to the
Retainer Agreement, setting forth a rate change, the client agrees that
such conduct shall be a deliberate disregard of this agreement and the
obligation to the law firm as to expenses and
fees. The Client agrees that the firm
may cease or suspend any work or services with respect to the
client’s matter, during the preparation and pendency of the motion
to withdraw, and may withdraw its representation, at the option of the
firm upon notice to the client as long as to do so is without
foreseeable prejudice to the client’s rights.
... Should the firm so elect to
withdraw its representation under such circumstances, the client hereby
agrees that such account delinquency shall be good cause and grounds for
such withdrawal. The client reserves
the right to present any defenses to such withdrawal.
2. General principles
Two general principles govern our analysis.
The first is that the retainer agreement may not authorize the
attorney to withdraw from the representation under circumstances in
which withdrawal would be impermissible under DR 2?110 of the Code
of Professional Responsibility. DR
2?110 contains express provisions regarding withdrawal from
employment by a lawyer. DR
2?110(B) sets forth conditions under which a lawyer must seek to
withdraw from the representation, while DR 2?110(C) sets forth
conditions under which it is permissible for a lawyer to do
so. Except as required or permitted by
DR 2?110, a lawyer may not terminate an ongoing
lawyer?client relationship. Even
where grounds for withdrawal are present, a lawyer engaged in a
proceeding before a tribunal must obtain the tribunal’s permission
before withdrawing if its rules so require. DR 2?110(A)(1). Furthermore, the lawyer may not terminate the representation
until the lawyer has taken steps to the extent reasonably practicable to
avoid any foreseeable prejudice to the rights of the
client. Those steps should include
giving due notice to the client, allowing the time for employment of
other counsel, delivering to the client all papers and property to which
the client is entitled and complying with applicable laws and
rules. DR?2?110(A)(2).
DR 2?110 does not authorize a lawyer to enter into, or
act in reliance on, a retainer agreement which purports to set forth
conditions for terminating the representation that would not otherwise
justify withdrawal under DR 2?110. It is axiomatic that a lawyer may not enter into an agreement
with a client in which the client expressly authorizes or permits the
lawyer to violate a Disciplinary Rule. DR 1?102(A)(1) expressly states that a lawyer or law firm
shall not violate a Disciplinary Rule. There is no general exception in the Code authorizing a lawyer
to violate a disciplinary rule pursuant to the client’s consent or
agreement. Further, although DR
2?110(C)(5) specifically permits withdrawal if the “client
knowingly and freely assents to termination of the
employment,” it does not
authorize an agreement in advance by which
the client assents to termination upon some future occurrence that is
unrelated to achieving the objectives of the
representation. For assent to be made “knowingly,” it must be made
with knowledge and understanding of all the facts and circumstances at
the time of the termination of the employment.
The second general principle is that the retainer agreement may
not mislead the client with regard to the attorney’s obligations,
including the obligation to continue as counsel in the absence of a
permissible ground for withdrawing from the
representation. As this Committee said
in N.Y. State 599 (1989), which concluded that a retainer agreement may
not properly include a nonrefundable retainer provision, “such a
provision would be improper in agreements with a client of limited
education or experience, or with any client who for any reason is
unlikely to have an adequate understanding of the circumstances ... that
might entitle the client to [object to the lawyer’s
withdrawal].... The essence of the
matter is clarity ? clarity that will assure the client’s
full understanding....”
Needless to say, nothing in Part 1400 of the Rules of the
Appellate Division purports to authorize an attorney representing a
party in a domestic relations matter to enter into a retainer agreement
that contravenes DR 2?110 or is misleading, or otherwise to
contravene provisions of the Code of Professional
Responsibility. Thus, provisions of a
retainer agreement referring to the conditions under which a lawyer
shall or may withdraw from the representation must accord with DR
2?110 and do so in a manner that is understandable and not
misleading to the client. Further, no
matter what any retainer agreement may provide, a lawyer may not
withdraw from representing a client unless under DR 2?110 he has
proper grounds for withdrawing, obtains any required permission from a
tribunal and takes appropriate steps to avoid foreseeable prejudice to
the rights of the client.
3. Analysis of the
Proposed Retainer Agreement
Overall, the proposed agreement is misleading in several
respects. First, it is misleading to
the client when it states that the enumerated circumstances “shall
be good cause for ... withdrawal.” This implies to the client that the lawyer has an absolute
right, and perhaps even a duty, to withdraw under any of these
circumstances. The agreement would be
less confusing if it utilized language to the effect that the enumerated
circumstances “may be good cause
for withdrawal.”
Additionally, the agreement would tend to mislead the client
concerning the limitations imposed on the ability of the lawyer to
withdraw. As discussed above, DR
2?110 forbids a lawyer from withdrawing until the lawyer has
obtained the consent of the tribunal, if required, and taken appropriate
steps to avoid foreseeable prejudice to the rights of the
client. The agreement makes no express
reference to these requirements1 as it must in
order to avoid misleadingly implying that a lawyer may terminate the
representation without complying with them.
The reference in paragraphs 2, 3 and 4 to “defenses to
withdraw” is also somewhat confusing. The agreement by this language apparently contemplates
objections which might be raised by the client before any tribunal whose
consent may be required. It is not
clear how any such “defenses” could be raised if the consent
of a tribunal is not required or sought by the
lawyer. In that event, if the
lawyer’s withdrawal is not proper, the client may complain to the
appropriate grievance committee, but that would not constitute a
“defense,” and a grievance committee has no jurisdiction to
undo a withdrawal.
In addition, as discussed below, problems are raised by
individual provisions.
Paragraph 1
The circumstances identified in quoted paragraph 1 would
generally provide permissible, if not mandatory, grounds for the lawyer
to seek to withdraw from the representation. The client conduct described in the quoted paragraph would
implicate one or more of the following provisions: DR 2?110(B)(1),
which requires a lawyer to withdraw from employment if “the client
is bringing the legal action, conducting the defense, or asserting a
position in the litigation, or is otherwise having steps taken, merely
for the purpose of harassing or maliciously injuring any person;”
DR 2?110(C)(1)(c), which permits the lawyer to withdraw if the
client “[i]nsists that the lawyer pursue a course of conduct which
is illegal”; DR 2?110(C)(1)(b), which permits a lawyer to
withdraw if the client “[p]ersists in a course of action involving
the lawyer’s services that the lawyer reasonably believes is
criminal or fraudulent”; and DR 2?110(C)(1)(g), which
permits the lawyer to withdraw if the client “[h]as used the
lawyer’s services to perpetrate a crime or
fraud.”
This provision is nevertheless improper, however, insofar as it
refers to the client’s “consent[] that the law firm may so
withdraw under such circumstances upon notice to the
client.” As noted above, the
lawyer may not withdraw under DR 2?110 if the tribunal’s
permission is required and has not been obtained or if necessary steps
have not been taken to avoid prejudice to the
client. To the extent that the
provision purports to allow the lawyer to withdraw without obtaining the
tribunal’s permission or averting prejudice, it contravenes DR
2?110. Even if the agreement is
not intended to have this meaning, the reference to the client’s
express consent to the lawyer’s withdrawal implies that the client
has no right to object to the withdrawal even on the grounds that it
would be prejudicial to the client. Because that language misleads the
client about the client’s rights, it is not proper for the lawyer
to include such language in a retainer agreement.
Paragraphs 2 and 3
Quoted paragraphs 2 and 3 would permit the lawyer to withdraw
from the representation if the client fails to follow all instructions
and advice of the firm “which bear upon ethical, strategic or
tactical considerations or matters” (quoted paragraph 2), or fails
to approve and engage the expert recommended by the firm (quoted
paragraph 3). This paragraph purports
to describe circumstances under which the client’s conduct would,
in the language of DR
2?110(C)(1)(d), “ render[] it unreasonably difficult for the
lawyer to carry out employment effectively,” and therefore permit
the lawyer to withdraw from the representation. However, this provision is misleading, because it is not
invariably the case that a client’s failure to approve the expert
recommended by counsel and to follow all other advice of counsel bearing
upon ethical, strategic or tactical considerations will “render[]
it unreasonably difficult for the lawyer to carry out employment
effectively.” At times, it may be
possible for the lawyer to represent the client effectively
notwithstanding the client’s rejection of the lawyer’s
advice.
Furthermore, at times the Code may require the lawyer to accede
to the client’s decisions concerning the
representation. EC 7?7 and EC
7?8 are the relevant provisions. EC 7?7 provides:
In certain areas of legal
representation not affecting the merits of the cause or substantially
prejudicing the rights of a client, a lawyer is entitled to make
decisions. But otherwise the authority
to make decisions is exclusively that of the client and, if made within
the framework of the law, such decisions are binding on the
lawyer....
EC 7?8
provides:
... In the final analysis, however, the
lawyer should always remember that the decision whether to forego
legally available objectives or methods because of non?legal
factors is ultimately for the client and not for the
lawyer. In the event that the client in
a non?adjudicatory matter insists upon a course of conduct that is
contrary to the judgment and advice of the lawyer but not prohibited by
Disciplinary Rules, the lawyer may withdraw from the
employment.
The quoted paragraphs 3 and 4
contravene these provisions to the extent that the lawyer might read
them to compel the client to accept the lawyer’s advice with
respect to decisions that, under the Code, are for the client to
make. Even if the quoted paragraphs
might be interpreted more narrowly, they are, in the very least,
misleading to the client concerning which decisions are ultimately for
the lawyer and which may be made by the client.
Paragraph 4
The quoted paragraph 4 is improper, first, because it would
permit the lawyer to terminate the representation upon the
client’s “failure to pay a bill within 30 days”
without regard to whether the client’s nonpayment was
deliberate. This paragraph is
apparently meant to refer to DR 2?110(C)(1)(f), but the
disciplinary rule permits a lawyer to withdraw only if the
client “[d]eliberately disregards an
agreement or obligation to the lawyer as to expenses or
fees.” As the Committee stated in N.Y. State 440 (1976),
DR 2?110(C)(1)(f) also provides
for withdrawal by a lawyer if his client “deliberately disregards
an agreement or obligation to the lawyer as to expenses or
fees.” The key word is
“deliberately.” “Mere failure to pay an agreed fee,
which is not deliberate, is not a ground for requesting such permission
(to withdraw).” N.Y. State 212
(1971); N.Y. State 187 (1971).
See also N.Y. 598 (1988) (discussing when a failure to pay a legal fee
is “deliberate”). To the
extent that the quoted paragraph 4 is meant to authorize the lawyer to
terminate the relationship for nonpayments that are not deliberate, this
provision contravenes DR 2?110. In the very least, the provision is misleading insofar as it
suggests to the client that the lawyer may withdraw where the
client’s failure to pay a bill was unavoidable or unintentional,
not deliberate.
Additionally, the quoted paragraph 4 is improper insofar as it
obligates the client “to execute an Amendment to the Retainer
Agreement, setting forth a rate change,” apparently at any time the lawyer demands regardless of the
amount of the rate change, and authorizes the lawyer to terminate the
representation “if the client fails or refuses ” to do
so. Under DR 2?106, any amended
fee agreement, like an initial fee agreement, must be reasonable and not
excessive; further, a lawyer may not use the threat of withdrawal to
coerce a fee increase after the representation has
commenced. See, e.g., McConwell v. FMG of Kansas City,
Inc., 861 P.2d 830, 843 (Kan. Ct. App.
1993). Where a prior fee agreement is modified, its reasonableness and
fairness have generally been closely
scrutinized. See, e.g., Anderson v. Sconza,
534 N.E.2d 445, 448 (Ill. App. 1989); Chicago Op. 93?1; ABA/BNA
Lawyers’ Manual on Professional Conduct 41:112 &
41:313. Although an initial retainer agreement might reasonably provide
for periodic increases in the lawyer’s hourly fee where the
representation is expected to be long?term, the quoted paragraph
does not do so, but purports to obtain the client’s consent to
whatever rate change the lawyer proposes without specifying when rate
changes will be made or how they will be
determined. This provision is
misleading, if not entirely improper, insofar as it purports to
authorize the lawyer to terminate the representation because of the
client’s refusal to accept any rate change, however unreasonable
or coercive, in the middle of the representation.2
CONCLUSION
For the reasons stated, the question posed is answered in the
negative.
(5-99)
1 Only quoted paragraph 4
minimally alludes to obtaining the consent of the tribunal by referring
to “the motion to withdraw.” It also states that the lawyer may withdraw for nonpayment
(but
not for other reasons) only “as long as
to do so is without foreseeable prejudice to the client’s
rights.”
2 The inquirer raises an additional concern that the
proposed agreement requires written notice from the client to initiate a
fee arbitration proceeding or to cancel the agreement, even though
neither Part 136 of the Rules of the Chief Administrator nor Part 1400
of the Rules of the Appellate Division requires such notice to be in
writing. Although this Committee does
not generally construe court rules outside of the Code of Professional
Responsibility, if the requirement of written notice contravenes such
rules, as it appears to do, a lawyer’s use of an agreement
containing that requirement constitutes a violation of DR
7?106(A), which provides, “A lawyer shall not disregard ...
a standing rule of a tribunal . ...”
Related Files
Opinion 719 (Adobe PDF File)
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