MANAGING THE RISK OF FIRING A CLIENT

Risk managing client firings is critical because the potential liability is so great when accused of an unjustified withdrawal. Before you decide to withdraw from representation for whatever reason consider these loss prevention concepts. One of them could help you avoid an unpleasant experience.

The requirements of Kentucky Rule of Professional Conduct 1.16, Declining or Terminating Representation, must be clearly understood. Any withdrawal must comply with the rule’s professional responsibility standards. Any effort to abbreviate them with a termination or escape clause in a letter of engagement is not effective and may lead to a false sense of security if a withdrawing lawyer fails to appreciate the binding authority of Rule 1.16.

If you choose to use a termination or escape clause in employment contracts, carefully consider the following points:

• Escape clauses may not purport to authorize lawyer withdrawal under circumstances that the Rules of Professional Conduct do not permit.
• Escape clauses may not mislead the client about the lawyer’s duty to continue the representation.
• Escape clauses may not use a client consent stipulation authorizing withdrawal under specified circumstances if it implies that the client has no right to object to withdrawal because of material adverse affect.
• Escape clauses may not predicate withdrawal on failure to follow advice relating to ethics, strategic, and tactical matters if the effect is to require the client to accept the lawyer’s advice on issues that the ethics rules reserve for the client to decide (e.g., settlement).
• Lawyers should explain the implications of the escape clause to a client at the time the agreement is made. This disclosure should cover the possibility of default of the client’s action, the client’s continued responsibility for disbursements, and potential liability to the opposing party for costs or sanctions if the lawyer withdraws.
• Nothing in an escape clause relieves a withdrawing lawyer from the duty to protect the client’s interest; e.g., giving reasonable notice of withdrawal, allowing time for retention of another lawyer, and promptly returning papers and property to which the client is entitled.

If you discover a conflict of interest during a representation, withdrawal is mandatory unless it is resolved. Lawyers loath to give up a case will often fail to see a conflict or ignore it. This can result in a malpractice claim because the client upon discovering the conflict will attribute motive to the lawyer for any unsatisfactory aspect of the representation. In fact the representation may have been optimal, but the client will not see it that way and a jury can be expected to be hard on what looks like a treacherous lawyer. Other risks assumed for failing to withdraw are disqualification motions by opposing counsel and bar disciplinary actions. In many conflict cases withdrawal from representing one or more clients is the best risk management -- and remember that Rule 1.16 mandates withdrawal in unresolved conflicts cases.

If a client accuses a lawyer of malpractice, the lawyer has an instant personal interest conflict. The question then becomes whether to immediately withdraw or obtain client consent to continue representation in an effort to repair the mistake. If there is no question that malpractice occurred (e.g., a missed mortgage in a title search or a missed statute of limitations) the lawyer has little choice but to notify the client of the malpractice, withdraw, and advise the client to seek counsel. If there is a reasonable possibility of repairing the error, it is often advisable to continue the representation if client consent can be obtained. You should consult your malpractice liability insurer before either withdrawing or continuing representation. For example, Lawyers Mutual has an aggressive program of claims repair and is invaluable in helping policyholders decide whether to withdraw or seek to continue representation.

Always do a complete file review just before filing an action. This is often a last clear chance to terminate the client from hell, the dog case, or the non-paying client without material adverse affect. Once a matter is before a court withdrawal becomes much more problematic.

Whenever a lawyer retires or leaves the firm do a complete file review of all matters under the supervision of that lawyer to assure that no client is inadvertently abandoned or that a client thinks his representation includes lawyers no longer on the matter.

Whenever possible withdrawal should be a clean break – a clear-cut decision with the client’s agreement in writing. Use a disengagement letter that:

1. Confirms that the relationship is ending with a brief description of the reasons for withdrawal.
2. Provides reasonable notice before withdrawal is final.
3. Avoids imprudent comment on the merits of the case.
4. Indicates whether payment is due for fees or expenses.
5. Recommends seeking other counsel.
6. Explains under what conditions the lawyer will consult with a successor counsel.
7. Identifies important deadlines.
8. Includes arrangements to transfer client files.
9. If appropriate, includes a closing status report.

After sending the disengagement letter you must 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 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 more click on How To Fire A Client.