The Risk Manager, Summer 2017

Lawyers are not required to provide free legal services to clients who fail to pay the agreed fees and may move to withdraw. While withdrawal for failure to pay fees is permissible, a lawyer must do so carefully to avoid malpractice claims and ethics complaints. The recent ABA Ethics Formal Opinion 476 Confidentiality Issues when Moving to Withdraw for Nonpayment of Fees in Civil Litigation (12/19/2016) provides sound guidance for withdrawing from a civil suit under the supervision of a judge.

The opinion compares a lawyer’s duty of confidentiality when moving for withdrawal for failure to pay fees with a court’s need for sufficient information to rule on the motion. The permissive authority to withdraw is contained in ABA Model Rule 1.16 in the following paragraphs:

[5] the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;

[6] the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client;

Comment [8] to the rule reinforces this authority: A lawyer may withdraw if the client refuses to abide by the terms of an agreement relating to the representation, such as an agreement concerning fees or court costs ….

[Editor’s Note: Kentucky Rule of Professional Conduct SCR 3.130, 1.16 [5] and [6], and Comment [8] are identical to the Model Rule.]

The opinion next addressed the requirements of Model Rule 1.6, Confidentiality of Information, that a lawyer must consider in making a withdrawal motion for non-payment of fees. It was reasoned, “that specific information should not be required with respect to a motion to withdraw for nonpayment of legal fees” based on Comment [3] to Rule 1.16:

The court may request an explanation for the withdrawal, while the lawyer may be bound to keep confidential the facts that would constitute such an explanation. The lawyer’s statement that professional considerations require termination of the representation ordinarily should be accepted as sufficient. ….

Editor’s Note: Kentucky Rule of Professional Conduct SCR 3.130, 1.16 Comment [3] is identical to the Model Rule.

The opinion then considered the scope of the judicial inquiry of the withdrawal motion, noting that courts have wide discretion in ruling on motions to withdraw. This analysis includes case examples of the range of rulings judges have made on how much information they required. The opinion concluded by offering stepped guidance for lawyers to comply with confidentiality duties depending on the judge’s requirements:

“Thus, in order to comply with Rule 1.6, a lawyer who has a good faith basis for withdrawal under Rule 1.16[b][5] and/or 1.16[b][6], and who complies with the applicable procedural prerequisites of the court for such motions, could:

(1) initially submit a motion providing no confidential client information apart from a reference to “professional considerations” or the like;

(2) upon being informed by the court that further information is necessary, respond, when practicable, by seeking to persuade the court to rule on the motion without requiring the disclosure of confidential client information, asserting all non-frivolous claims of confidentiality and privilege; and if that fails;

(3) thereupon under Rule 1.6[b][5] (Rule 1.6[b][3] in Kentucky) submit only such information as is reasonably necessary to satisfy the needs of the court and preferably by whatever restricted means of submission, such as in camera review under seal, or such other procedures designated to minimize disclosure as the court determines is appropriate.

If the court expressly orders the lawyer to make further disclosure, the exception in Rule 1.6[b][6] (Rule 1.6[b][4] in Kentucky) for disclosures required to comply with a court order will apply, subject to the lawyer’s compliance with the requirements of Comment [15].” (Rule 1.6, Comment [11] in Kentucky).

This opinion is highly recommended professional reading for both Kentucky lawyers and judges. Just Google the citation.

Our risk management advice for withdrawal is:

  1. Know the Rules.*
    Paragraph [b][5]]of Kentucky Rule of Professional Conduct 1.16 provides that withdrawal is permissible for cause if the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled….

    Paragraph [d] of Rule 1.16 provides that a lawyer withdrawing must take steps to protect the client’s interest. These steps include:
    • giving reasonable notice of withdrawal,
    • allowing time for retention of another lawyer,
    • promptly returning papers and property to which the client is entitled, and
    • refunding any advance payment of fees that have not been earned.
  2. Understand the Malpractice Exposure When Withdrawing.
    Act of Withdrawal: The risk of an unjustified act of withdrawal is that the client will be considered abandoned by the lawyer. The lawyer is then exposed to liability for a claim for all damages proximately caused by the unjustified withdrawal as well as bar discipline. A Kentucky lawyer was disciplined for an unjustified withdrawal when he abruptly closed an Eastern Kentucky office without notifying a client.

    Manner of Withdrawal: There is a risk even when a lawyer has justifiable grounds for withdrawal, if the withdrawal is done in a manner that does not adequately protect the interests of the client. An Ohio lawyer was disciplined for failing to arrange for another lawyer to represent one of her clients. The lawyer received court permission to withdraw, citing deterioration of the attorney-client relationship, the client’s failure to communicate with her, and the client’s failure to pay her fees as grounds for termination. She, however, never specifically told her client she was withdrawing. The unrepresented client then received an unfavorable judgment based on a divorce decree that contained an error.
  3. Risk Manage Withdrawal Carefully.
  • Always do a complete file review just before filing a suit. This is often the last clear chance to terminate a non-paying client without complications. Once a matter is before a court withdrawal becomes much more problematic.
  • Whenever possible withdrawal should be a clean break – a clear-cut decision with the client’s agreement in writing. Use a disengagement letter that:
    • Confirms that the relationship is ending with a brief description of the reasons for withdrawal.
    • Provides reasonable notice before withdrawal is final.
    • Avoids imprudent comment on the merits of the case.
    • Indicates whether payment is due for fees or expenses.
    • Recommends seeking other counsel.
    • Explains under what conditions the lawyer will consult with a successor counsel.
    • Identifies important deadlines.
    • Includes arrangements to transfer client files.
    • If appropriate, includes a closing status report.
  • After sending the disengagement letter, carefully follow through on the duty to take necessary steps to protect the client’s interest and comply with all representations in the disengagement letter. This avoids a malpractice claim over the manner of withdrawal.
  • A complete copy of the file must be retained. A client from whom you have withdrawn has a high potential to file a malpractice claim or bar complaint. The first line of defense is a complete file with a comprehensive disengagement letter. This is the best evidence for showing competent and ethical practice in terminating a client.

*From KBA Bench & Bar article “How To Fire A Client” available at Go to Resources, click on Bench & Bar Articles page, and click on the article.