Nothing seems easier than knowing when you have a client and most lawyers take it for granted that this is equally clear to others. In fact, there are frequent instances when lawyers believing that a client-attorney relationship was never formed or was terminated have found themselves accused of a conflict of interest or malpractice by a person claiming to be a client. A lawyer’s worst nightmare is to have a client and not know it until a statute of limitations passes when nothing can be done to remedy the error. The following recent cases from other jurisdictions are illustrative of the confusion that can arise over the question of whether a lawyer had a client and provide some useful risk management lessons.
Straggler Clients: In Jones v. Rambanco Ltd. (2006 WL 2237708, W.D. Wa 2006) The GTH law firm represented a subsidiary of a company in 2002 that it was now suing on behalf of its employees. The company moved to disqualify GTH claiming to still be a client from the representation of its subsidiary. GTH argued that the company was a former client because the subsidiary’s matter had settled in 2002 and the firm had not provided any legal services to the subsidiary since that time which was now over three years. The Court reasoned that some event inconsistent with an attorney-client relationship is necessary to conclude that a representation is terminated. The facts showed that GTH had never sent a closing letter to the subsidiary, had three inactive subsidiary files that GTH considered completed but had never been closed, was paying for storage of dozens of boxes of documents relating to the subsidiary’s dispute, had not notified the subsidiary when several lawyers who had worked on its matter left the firm, and assigned a new billing partner at that time for the subsidiary. Furthermore, the settlement agreement named GTH as the contact for any issues regarding the settlement agreement that did not expire until 2011. The Court ruled that these circumstances showed that GTH had the intention of a continuing representation of the subsidiary that required disqualification from representing the plaintiffs in the case against the parent.
Lessons Learned: As tempting as it is for the purposes of new business to foster the idea that a relationship continues once a matter is concluded, the best practice is to use closing letters to make crystal clear that the representation is over and that no further duties are owed the now former client. Had GTH followed this practice it would not have been disqualified because the subsidiary would have been a former client and there was no substantial relationship between the two cases. You are at the mercy of straggler clients when you leave the situation dangling – and don’t expect mercy when accused of malpractice or a conflict of interest.
When is Terminating a Client Effective? An Ohio lawyer fell out with his client who he was defending in a criminal matter. The client later sued the lawyer for malpractice who defended by claiming that the suit was not filed before the malpractice statute of limitations had expired. The case turned on whether the representation was terminated when the lawyer sent the client letters dated August 26, 2002 and August 28, 2002 referring to a telephone conversation in which the lawyer purported to terminate the representation; or not until several days later when the lawyer complied with a local court rule requiring a motion to withdraw. If the local court rule is determinative of the issue, the client’s suit was in time. The intermediate appellate court held that the local court rule controlled and that the malpractice suit was timely. The Ohio Supreme Court reversed holding that “The date of termination of an attorney-client relationship … is a fact-specific determination to be made according to the rules set forth by statute and by case law. The determination is not dependent on local rules of court.” The Court remanded the case for a determination of the termination date of the attorney-client relationship. (Smith v. Conley, 846 N.E.2d 509 (2006))
Lessons Learned: The Ohio lawyer may have been lucky. It is not clear from the decision whether when terminating his client he gave reasonable notice before withdrawing, but it does not appear so. He did the most important thing, however, by memorializing his telephonic withdrawal in letters that show that the client knew not later than August 28, 2002 that the lawyer had withdrawn and that the client was on notice at that time of any malpractice. In so doing the lawyer is able to claim on remand that the client missed the statute by several days and should prevail. Never forget that a terminated client is a high risk for making a malpractice claim or bar complaint. Always document a termination with a disengagement letter that:
Confusion over the Scope of the Engagement: A law firm represented a client in a federal civil rights action over the client’s firing as police chief that included a 42 USC Sec. 1983 cause of action and a state breach of contract cause of action. The Court dismissed with prejudice the federal claim and dismissed the state claim without prejudice. The client had six months to file a state court action or until March 13, 2000. The firm sent the client a new retainer agreement in October 1999 for representation in the state action. The client did not sign and return the agreement until July 2000, well after the statute of limitations had passed. The client then sued the firm for malpractice claiming that he believed that he had an existing attorney-client relationship for all aspects of the matter that included the state action. The Court found that the client’s unilateral belief that there was a relationship was insufficient to raise a triable issue of fact and that the firm “established their entitlement to judgment as a matter of law because no attorney-client relationship existed … with respect to a state breach of contract action ….” Interestingly, the Court added to its opinion that the state action lacked merit in any event. (Carlos v. Lovett & Gould, 2006 WL 1413524, N.Y.A.D. 2 Dept., 5/23/2006)
Lessons Learned: The firm may have been lucky in this case as indicated by the Court’s gratuitous finding that the state action lacked merit. It should have been apparent from the outset of the representation that a state action might be required. If the firm did not intend to include that as part of the representation, the client should have received a thorough explanation of this limitation. A lawyer has a duty not to ignore circumstances surrounding a representation indicating legal issues for a client because they are outside the scope of representation. These issues should be brought to the attention of the client and the letter of engagement should clearly stipulate that they are not included in the representation.