Termination, contracts, and fees - Communications with the c...

Learning Outcomes

After reading this article, you will be able to identify when a lawyer must or may withdraw from representation, explain the requirements for fee agreements and modifications, and apply the rules governing communication with clients about scope, fees, and termination. You will also understand the duties owed to clients upon termination and the consequences of improper conduct in these areas.

MPRE Syllabus

For the MPRE, you are required to understand the rules governing the end of the client-lawyer relationship, fee contracts, and communications with clients. This article addresses the following syllabus points:

• Recognize when withdrawal from representation is mandatory or permissive, and the procedures required.
• Explain the requirements for fee agreements, including reasonableness, writing, and modifications.
• Distinguish between types of fee arrangements (hourly, contingent, retainer) and their limitations.
• Understand the lawyer’s duties to communicate with clients about scope, fees, and termination.
• Describe obligations upon termination, including notice, return of property, and refund of unearned fees.
• Apply the rules for resolving fee disputes and handling disputed funds.
• Identify consequences of improper termination or fee practices.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following always requires a lawyer to withdraw from representing a client?
   1. The client refuses to pay a disputed fee.
   2. The client insists on conduct that would violate the law or ethics rules.
   3. The client disagrees with the lawyer’s strategy.
   4. The lawyer is busy with other matters.
2. A lawyer wants to increase her hourly rate during an ongoing matter. What is required for the change to be enforceable?
   1. The lawyer’s unilateral notice.
   2. The client’s oral agreement.
   3. The client’s written consent after disclosure.
   4. No client consent is needed.
3. When a client fires a lawyer, the lawyer must:
   1. Retain all client files until paid in full.
   2. Promptly return all client property and unearned fees.
   3. Keep a copy of the client’s confidential documents for future use.
   4. Notify the court but not the client.
4. If a client disputes part of a lawyer’s fee after settlement funds are received, the lawyer must:
   1. Disburse the entire amount to the client.
   2. Retain all funds until the dispute is resolved.
   3. Promptly distribute the undisputed portion and hold the disputed amount in trust.
   4. Transfer the disputed amount to the lawyer’s personal account.

Introduction

A lawyer’s professional obligations include clear communication with clients about the scope of representation, fees, and the circumstances under which representation may end. The Model Rules of Professional Conduct set out when a lawyer must or may withdraw, how fee agreements must be structured and communicated, and what duties arise when the relationship ends. Failure to comply can result in discipline, civil liability, or loss of fees.

Key Term: Withdrawal
The process by which a lawyer ends representation of a client, either by choice, client discharge, or as required by law or ethics rules.

Termination of Representation

A lawyer’s representation of a client can end in several ways: completion of the matter, discharge by the client, or withdrawal by the lawyer. The rules distinguish between mandatory and permissive withdrawal.

Mandatory Withdrawal

A lawyer must withdraw if:

• Continuing would result in a violation of the law or ethics rules.
• The lawyer’s physical or mental condition materially impairs the ability to represent the client.
• The lawyer is discharged by the client.

A lawyer must comply with applicable law or court rules requiring notice or permission before withdrawing, especially in litigation.

Key Term: Mandatory Withdrawal
Circumstances in which a lawyer is required to terminate representation, regardless of client wishes or potential harm.

Permissive Withdrawal

A lawyer may withdraw in certain circumstances, even if withdrawal may harm the client, such as when:

• The client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent.
• The client has used the lawyer’s services to perpetrate a crime or fraud.
• The client fails to fulfill an obligation to the lawyer (such as paying fees) after reasonable warning.
• The representation will result in unreasonable financial burden or has been rendered unreasonably difficult by the client.
• Other good cause exists.

Court approval may be required if the matter is before a tribunal.

Key Term: Permissive Withdrawal
Circumstances in which a lawyer is allowed, but not required, to terminate representation, subject to court approval if in litigation.

Duties Upon Termination

When representation ends, the lawyer must:

• Give reasonable notice to the client.
• Allow time for the client to find other counsel.
• Surrender papers and property to which the client is entitled.
• Refund any advance payment of fees or expenses not earned or incurred.

A lawyer may retain client papers only to the extent permitted by law, such as to secure payment of a fee if allowed.

Fee Agreements and Modifications

Lawyers must communicate the basis or rate of the fee, preferably in writing, before or within a reasonable time after starting representation. Contingent fee agreements must always be in writing and signed by the client.

Key Term: Fee Agreement
The contract between lawyer and client specifying the basis or rate of the lawyer’s compensation and any expenses for which the client is responsible.

Types of Fees

• Hourly or Fixed Fees: Must be reasonable and communicated to the client.
• Contingent Fees: Prohibited in criminal and certain domestic relations matters; must be reasonable, in writing, and signed by the client.
• Retainers: Advance payments for availability or future services; unearned portions must be refunded if representation ends.

Modifying Fee Agreements

A lawyer may modify a fee agreement during representation, but the modification must be reasonable under the circumstances and communicated to the client. If the lawyer proposes the change, the client must accept it for it to be effective. Significant increases or changes in the nature of the fee require client consent, preferably in writing.

Communication with the Client

Lawyers must keep clients reasonably informed about the status of their matter and promptly comply with reasonable requests for information. The lawyer must explain matters to the extent reasonably necessary for the client to make informed decisions.

Key Term: Communication
The lawyer’s duty to inform the client about significant developments, fees, scope, and any limitations or changes in the representation.

Fee Disputes and Handling of Funds

If a lawyer receives funds in which both the lawyer and client claim an interest (such as settlement proceeds), the lawyer must promptly distribute any undisputed portion and keep the disputed portion in a client trust account until the dispute is resolved.

Key Term: Trust Account
A separate account in which a lawyer must hold client funds, including advances and disputed amounts, to prevent commingling with the lawyer’s own funds.

Worked Example 1.1

A lawyer is representing a client in a civil case. The client stops paying agreed fees and ignores repeated requests for payment. The lawyer warns the client that she will withdraw if payment is not made. The client still does not pay. May the lawyer withdraw?

Answer:
Yes. The lawyer may withdraw after giving reasonable warning if the client fails to fulfill an obligation to the lawyer, such as paying fees, provided the lawyer obtains court permission if required.

Worked Example 1.2

A lawyer and client agree to a fixed fee at the start of representation. Halfway through, the lawyer wants to increase the fee due to unexpected complexity. The client is informed and agrees in writing. Is the new fee enforceable?

Answer:
Yes. A fee modification during representation is enforceable if it is reasonable under the circumstances and the client consents, preferably in writing.

Worked Example 1.3

A lawyer receives a $10,000 settlement check for a client. The client disputes $2,000 of the lawyer’s fee. What must the lawyer do with the funds?

Answer:
The lawyer must promptly distribute the undisputed $8,000 to the client and keep the disputed $2,000 in the trust account until the dispute is resolved.

Exam Warning

Be careful: A lawyer cannot refuse to return client property or unearned fees after termination, even if the client owes money. Holding client files or funds as a bargaining tool is a violation.

Revision Tip

Always distinguish between mandatory and permissive withdrawal. Know the specific requirements for fee agreements and the handling of disputed funds.

Key Point Checklist

This article has covered the following key knowledge points:

• Lawyers must withdraw if continuing would violate law or ethics rules, the lawyer is impaired, or the client fires the lawyer.
• Permissive withdrawal is allowed in specific circumstances, subject to court approval if in litigation.
• Upon termination, lawyers must give notice, return client property, and refund unearned fees.
• Fee agreements must be reasonable and communicated, with contingent fees in writing and signed.
• Modifications to fee agreements require client consent and must be reasonable.
• Lawyers must keep clients informed about scope, fees, and any changes.
• Disputed funds must be held in trust; undisputed funds must be promptly distributed.
• Improper termination or fee practices can result in discipline or liability.

Key Terms and Concepts

• Withdrawal
• Mandatory Withdrawal
• Permissive Withdrawal
• Fee Agreement
• Communication
• Trust Account