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Firing a Non-Paying Client Results in Public Reprimand

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An Ohio lawyer learned the hard way that lawyers are getting few breaks if it is decided they abandoned a client rather than protecting her interest when withdrawing. Equally problematic for lawyers is the malpractice risk in these circumstances when in effect a lawyer still has a client and does not know it. Typically what happens is that a statute of limitations or other time limitation is missed and the ‘abandoned client’ claims malpractice. If the client successfully establishes that the representation was not properly terminated, often all there is left to do is figure out where to send the check.

The Ohio lawyer agreed to represent a client in possession of a house facing eviction. The agreement was the lawyer would help the client avoid eviction and purchase the house. The lawyer requested a $1,500 retainer that was never paid. The effort to purchase the house failed because of the client’s questionable financing. At this point the lawyer told the client that he was terminating the representation for failure to pay the retainer and that he would not appear in court at the eviction proceeding. He also orally informed the landowner’s lawyer that he was withdrawing. Neither the lawyer nor the client appeared at the eviction hearing that resulted in the landowner regaining possession of the house and the client’s possessions being removed from the house.

The Ohio Supreme Court ordered a public reprimand for the lawyer focusing on the facts that showed the lawyer had accepted late payment from the client in a prior representation, was a casual drinking acquaintance of the client at a local bar, and had not terminated the representation in writing. The reprimand was issued notwithstanding the fact that there was no evidence that the lawyer ever filed an appearance in the eviction proceeding and that the Ohio disciplinary rules do not require a lawyer to confirm in writing that a representation is terminated for failure to pay fees.

This is a harsh result by any measure and is a reflection of how stringently disciplinary authorities are protecting clients’ interests. Given the attendant malpractice exposure in abandoned client claims, it is essential that when withdrawing a lawyer connect all the dots and err on the side of doing too much rather than too little in protecting the terminated client’s interest. What follows are some of the key things to know and do when firing a client for failure to pay fees:

  1. Know the Rules.
    Paragraph (b) (4) of Kentucky Rule of Professional Conduct 1.16 (SCR 3.130) 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 even 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 should be retained. A fired client or one that fired you has a high potential to be a malpractice claimant. 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.

For information on risk managing withdrawal in other situations read the KBA Bench & Bar article “How To Fire A Client” available on our web site– go to theResources/Bench &Bar Articles page.

Sources for this article are Cuyahoga county Bar Assoc. v. Ballou, 109 Ohio St.3d 152 (2006); Kentucky Bar Ass’n v. Rankin, 999 S.W.2d 710 (Ky. 1999); Office of Disciplinary Counsel v. Butler, 706 N.E.2d 757 (Ohio 1999); and extracts from “How to Fire a Client,” by Del O’Roark, KBA Bench and Bar, Vol. 65 No. 3 (May 2001).

 


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