In 2009 the Kentucky Supreme Court substantially revised the Kentucky Rules of Professional Conduct.
Articles in this index written before 2009 citing Kentucky Rules of Professional Conduct must be checked for any changes to the rule cited.

Letters of Engagement are a Hot Topic with Insurers and Risk Managers

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The best evidence of the increased concern over use of letters of engagement (LOE) by lawyers is that two sessions of the recent ABA Spring Legal Malpractice Conference were devoted to that issue. Insurers and risk managers are up in arms over lawyers’ inconsistent use and down right neglect of LOEs. The concern centered on legal malpractice liability and stricter underwriting standards — both with premium increase implications. This development suggests that this is a good time to offer an analysis of the issue with some risk management guidance.

Why Don’t Lawyers Routinely Use LOEs?
Why They Should!

The ABA Conference and the 2011 Legal Malpractice & Risk Management Conference offered these examples of why many lawyers fail to use LOEs and why they should:

Don’t use because:

  • My clients will be offended by a lengthy highly detailed LOE. They are too formal and off-putting.
  • I don’t want to limit my work for this new client.
  • She was a long-standing client.
  • I was charging very little; this was a favor for a friend; it was just a question at a cocktail party.
  • How likely are we to be sued?
  • A boring waste of time and anyway the dog ate my LOE for this matter.

Should use because:

  • Complies with Rules of Professional Conduct on competence, diligence, client communication, and fees.
  • Avoids good faith misunderstandings or miscommunications.
  • May generate additional work. lGood way to cover file retention and destruction.
  • Is Exhibit A in the defense of any malpractice claim or bar complaint. It is the first thing the court or bar counsel will want to look at.
  • One authority observes cynically “everybody lies.” Even if an exaggeration the point is well taken.
  • Will reduce conflict risks and settle scope of engagement issues.
  • By specifically identifying who is the client, an LOE protects against suits by non-clients.
  • Can make the difference between triable issues of fact and summary judgment.

Letters of Engagement

The first risk management action that should be taken with every new matter after a conflict of interest check is the preparation of a comprehensive letter of engagement including fee terms and conditions. Many lawyers confuse a fee agreement with an LOE. A fee agreement standing alone is not an LOE – it accomplishes few of the purposes or protections of a thorough LOE.

The following checklist identifies key considerations in tailoring a comprehensive LOE for a new matter:

  1. Client Identification
  2. Related-Party Identification
  3. Conflict of Interest, Attorney-Client Privilege, and Confidentiality Issues
  4. Scope of Representation
  5. Related Matters and Limiting the Scope of Representation
  6. Identification of Goals
  7. Scope of Authority
  8. Staffing the Engagement
  9. Legal Fees and Expenses
    • retainers
    • rate changes
  10. Billing Procedures
    • format
    • the client’s responsibilities for fee payment
    • how often the client will be billed
    • when payment is expected to be made
    • the firm’s options when fees and costs are not paid timely
    • whether interest will be charged for late fee payment
    • what fees are due if the client discharges the lawyer before completion of the representation
  11. Scheduling Major Steps
  12. Consent for Use of Email, Smart Phones, Cloud Computing, and Any Other Electronic Device The Firm Uses to Send Client Confidential Information
  13. File Retention and Destruction
  14. Dispute Resolution
  15. Withdrawal or Termination
  16. Signature by Lawyer and Client*

* This list is a composite derived from several sources to include Legal Malpractice 2009 Edition, § 2:10 and the Minnesota Lawyers Mutual Insurance Company.

Sample LOEs are available on Lawyers Mutual’s Website at lmick.com – click on Resources (do not click on the drop down menu) and then on the listed LOEs.

Risk Management Procedures for Implementing
LOE Requirements

Many firms have a policy to use LOEs in all representations, but many are also inconsistent in following this policy. At the ABA Conference the following compliance procedures were recommended:

  • Cannot open/work/bill a file until conflicts are checked and cleared.
  • Cannot open/work/bill a file until an LOE is sent (and returned). After contemplation, send an LOE immediately by mail or email.
  • Have approved template letters for each practice group.
  • Make sure attorneys AND staff understand the importance of LOEs – audit.
  • Countersignature from client required – diaried.
  • For existing clients, send email confirming scope of new matter.

At the 2011 Legal Malpractice & Risk Management Conference it was recommended to send LOEs by email because it is easier that way to get acknowledgement and return. Be sure to diary this email procedure to assure that acknowledgment is received and saved. Instruct the client to print the LOE, sign it, and mail it back. Make sure that the signed copy is received.

Should a Lawyer Always Have a Client Countersign an LOE?

Kentucky does not have a rule requiring that clients countersign all LOEs. Kentucky Rule of Professional Conduct 1.5, Fees, (c) does require that a contingency fee agreement be in a writing signed by the client. Therefore, a lawyer must obtain a client’s signature on an LOE that includes a contingency fee agreement.

Notwithstanding this limited requirement, good risk management means using an LOE in every matter and having it countersigned by the client. Be leery of sudden emergency matters when the client insists on immediate service without a LOE. The tendency is to not follow up with an LOE when time permits. This can lead to serious misunderstandings between lawyer and client.

Don’t Overlook the Other Engagement Letters – “Dis” And “Non”

Space does not permit a detailed analysis of disengagement and non-engagement letters. Our long-standing risk management advice on their use follows:

Disengagement:

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 actions to protect the client’s interest and comply with the representations in the disengagement letter. This avoids a malpractice claim over the manner of withdrawal.

Finally, a complete copy of the file should be retained. A disengaged client or one that terminated 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 disengaging a client.

Non-engagement:

Always use letters of non-engagement for declined representations. They are best sent by certified mail, return receipt requested. A former prospective client with a complaint or claim “never” receives a non-engagement letter sent by regular mail. A typical letter:

  • Thanks the prospective client for making the personal contact, calling, or coming into the office.
  • Includes the date and subject matter of the consultation.
  • Provides clearly that representation will not be undertaken.
  • Repeats any legal advice or information given — making sure that it complies with the applicable standard of care.
  • Advises that there is always a potential for a statute of limitations or notice requirement problem if the matter is not promptly pursued elsewhere. Providing specific statute of limitations times should be avoided because of the limited information typically received in a preliminary consultation. If, however, it appears that a limitations period will expire in a short period of time, the declined prospective client should be informed of this concern and urged to seek another lawyer immediately.
  • Advises that other legal advice be sought.
  • Avoids giving an exact reason for the declination, why the claim lacks merit, or why other parties are not liable.
  • Encourages the person to call again.

 


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