Five Tips for Better Engagement Letters

Transcription

1 Five Tips for Better Engagement Letters By Jonathan E. Hawkins If you have had a client, then chances are pretty good that you have used an engagement letter or retainer agreement of some kind. This article discusses five suggestions for drafting more effective engagement agreements. 1. Clearly Identify the Client Lawyers can get into trouble when there are misunderstandings as to who they do and do not represent. Such uncertainty can lead to claims of malpractice, assertions of conflicts, and other issues. One helpful approach to avoid these problems is to use a written engagement letter to clearly state both who the client is and who it is not. Specifying your client is particularly important when representing corporate entity clients. Many entities have multiple owners, shareholders, and officers, and these subgroups may have little or no overlap. When representing an entity, lawyers will likely be dealing with one or more individual representatives. Those individuals (and the lawyer) may not fully understand exactly who it is the lawyer represents. At some point, the interests of the entity, the owners, officers, and representatives could diverge, causing one or more conflicts to arise. For these reasons, when representing an entity, lawyers should clearly state that their client is the corporate entity and that they are not representing the owners, shareholders, and/or officers individually. See, e.g., Ga. Rule Prof l Conduct 1.13(f). If only representing one owner, shareholder, or officer individually, lawyers should clearly state that any related entities and other individuals are not being represented. Lawyers may also encounter situations when there are multiple affiliate or subsidiary companies, but they are only representing one or some subset of the affiliates. If so, lawyers should state the name of each client entity that is being represented and which entities are not. To that end, lawyers should not include over-inclusive, vague language, such as we are representing Company XYZ and

2 all of its affiliates, all of its subsidiaries, or all of its related entities. This could lead to conflicts, or worse, down the road. Often, multiple entities can have names that closely resemble each other. Therefore, it is important to put in writing the precise name of each client that is being represented. Specifying exactly who the client is and is not will also alert the lawyer to any potential conflicts or the need to obtain conflict waivers or consents, if allowed. 2. Clearly Define the Scope of Services Many disputes with clients arise from a disagreement about the nature and scope of the engagement. Most clients will assume their lawyer is doing more for them than the lawyer intends. One way to limit disputes about what a lawyer was or was not hired to do is to clearly state, in writing, the scope of the engagement. Clarity is the goal. Explicitly outlining the nature and scope of the lawyer s services in the engagement letter may help the lawyer avoid or limit a claim of breaching a duty that he or she never intended or agreed to undertake. Clearly defining the scope of the services to be rendered can also help focus the discussion between the lawyer and client as to the client s goals in the representation. Furthermore, it can assist the lawyer in determining potential conflicts of interest. The engagement letter should describe what the lawyer will be handling very specifically. The more specific, the better. The engagement letter should also state what work the lawyer will not be handling (e.g., tax issues or handling an appeal in trial process). See Georgia Rule of Prof l Conduct 1.2(c). The agreement should advise the client to seek such advice from other lawyers or professionals. Describing the scope of engagement in writing will provide the attorney protection should some issue arise in the future, where the client contends the lawyer should have advised him or taken certain action, but the lawyer did not intend to cover that area. See, e.g., SCB Diversified Mun. Portfolio v. Crews & Associates, 2012 WL 13708, at *7 (E.D. La. Jan. 4, 2012).

3 Open-ended language such as and any future matter that may arise or this agreement will apply to all services rendered by us in the future should be avoided. Lawyers should also avoid broad statements like will provide general business advice or general legal advice. Vagueness regarding the scope of the lawyer s services will likely be construed against the lawyer. See, e.g., Young v. Stump, 294 Ga. App. 351, 353, 669 S.E.2d 148, 150 (2008). If additional work outside of the original scope arises, then the lawyer should issue, and the client should sign, an amendment or a new engagement letter listing the new assignment. 3. Set Expectations The engagement letter is a great place to set out what a client should expect from the engagement. For example, the letter can explain how the lawyer typically communicates; how often the client can expect communications; how s/phone calls will be returned; and when to expect receipt of filings, letters, and documents. The engagement letter is also a good place to specify what decision-making authority the lawyer will have during the engagement. Lawyers may wish to retain the following rights: the right to agree to short extensions as a matter of professional courtesy; the right to use whatever steps necessary to achieve the purpose/goal of a matter (within reason); the right to hire investigators and experts necessary to prepare the matter; and the right to decide how issues should be argued in correspondence, pleadings, or to a court. Lawyers should never make statements to clients that imply that a certain result will absolutely be obtained. Going further, lawyers should consider putting

4 an express statement into the engagement letter that there is no guarantee of success in the matter and getting a written acknowledgment that no specific result has been promised to the client. Lawyers should avoid superlatives or definitive statements like we always provide the highest quality or we always. If the relationship goes south down the road, such statements could be construed as an assumption of a higher standard of care. Lastly, lawyers may want to include a discussion on what is considered responsible use of and social media during the engagement. 4. Discuss the Client s Responsibilities An engagement letter should clearly discuss what duties the client has during the engagement. Some clients are unfamiliar with legal processes and may not understand how their participation is required. And some clients have their own in-house counsel who may be undertaking certain aspects of a matter. Lawyers should require truthfulness from their clients, which includes full disclosure of all facts and documents. This is particularly true when accepting an engagement on a contingency basis. In order to properly assess the risk of taking on the matter, lawyers need access to all relevant facts. If a client withholds important information, a lawyer may end up investing time and advancing significant money in a case only to learn about an adverse fact when the client is testifying at trial. This truthfulness duty should be put in writing in the engagement agreement. Lawyers should also require cooperation from their clients. Clients should agree to keep appointments, and they should agree to make themselves available during the engagement for meetings, depositions, mediation, hearings, trial, and the like. Clients should be informed of their duty to update their lawyers of any change in address or contact information. If the client is an entity, it should also inform lawyer of any changes in structure or ownership. Where necessary, clients should also be informed of their duty to preserve evidence. Such a notice could save a client from making an unintended decision

5 with respect to certain evidence and could save the lawyer from a malpractice claim from the client or from sanctions imposed by a court. 5. Discuss Termination and Withdrawal Obviously, a client can terminate an engagement at any time. That right should be communicated to the client in the engagement letter. In addition, lawyers should describe the circumstances in which they may withdraw or terminate the relationship. Lawyers should consider including some or all of the following language in the engagement letter: the lawyer may withdraw for any reason; if the client fails to communicate or cooperate, the lawyer can withdraw; if the client fails to pay, the lawyer can withdraw; if the client lies or threatens to lie, the lawyer can withdraw; if the client takes action contrary to the lawyer s advice, the lawyer can withdraw; if the client asks the lawyer to engage in unethical or illegal behavior, the lawyer must withdraw; and if a conflict arises, the lawyer must withdraw. Lawyers should also consider including a provision stating when the representation will be deemed to have ended. Establishing an end point will help set the starting point of the statute of limitations for malpractice claims and when the client becomes a former client for conflict purposes. Jonathan E. Hawkins is a partner at the law firm of Krevolin & Horst, LLC. He maintains a robust litigation practice and represents clients in numerous business sectors in high-stakes complex commercial litigation. He also serves as outside general, business, and ethics counsel to lawyers and law firms and assists them in risk management, law firm structuring, partnership agreements, employment agreements, of counsel agreements, lateral moves, separation agreements, law firm dissolutions, attorney fee disputes, and ethics advice. Jonathan also publishes a blog dedicated to discussing the business and law of lawyering at Sign up for weekly updates. You can also reach Jonathan at hawkins@khlawfirm.com.