Ethics: The Perils of Sloppy Engagement Agreements

Particular care is in order because agreements between a lawyer and client are interpreted from the reasonable client’s perspective, meaning that the client will typically get the benefit of the doubt when contract language is ambiguous or unclear. The Restatement of the Law Governing Lawyers gives several reasons for this approach. One is that contracts are traditionally interpreted against the drafter, who, in this setting, is almost always the lawyer. Another is that lawyers are ordinarily in the better position to spot and correct ambiguities. See Restatement § 18 cmt. h.

Clarity is obviously needed when it comes to arrangements about legal fees, but other terms of the engagement agreement must be equally clear. Two recent cases of sloppy drafting involved forum-selection clauses in retainer agreements. In the first, the clause had a fatal typographical error. The court refused to enforce it because it “was not clear on its face and required interpretation,” and no explanation had been given. Falk & Fish, L.L.P. v. Pinkston’s Lawnmower & Equip., Inc., 317 S.W.3d 523 (Tex. 2010).

The second case shows that even clear language is not enough if it is over the client’s head. The dispute was over forum selection and choice of law provisions in a criminal defense lawyer’s retainer agreement. Although the provisions were neither ambiguous nor misleading, the court found that they were not “written in the type of plain English that a lawyer could reasonably assume any criminal defendant or his family would understand without explanation.” And, again, the lawyer had not sat down and explained the contract to the client. It did not help that the agreement urged the client to read closely and ask questions and that it included a representation that the client understood it. The court said that a lawyer may not “shield himself with the legal fiction that, by signing a document, his client actually understands each provision.” Brown v. Partipilo, 2010 U.S. Dist. LEXIS 108106 (N.D. W. Va. Oct. 8, 2010).

Two recent decisions from federal courts of appeals suggest that when it comes to conflicts of interest, lawyers should be even more cautious than usual. That makes sense because a client’s waiver of a conflict is effective under the ethics rules only if the client gives “informed consent.” In one case, the Second Circuit found that a law firm’s conflict-waiver language was “not plain enough or clear enough” for what the firm said it was trying to achieve. GSI Commerce Solutions, Inc. v. BabyCenter, LLC, 618 F.3d 204 (2d Cir. 2010). More recently, the Federal Circuit held that the conflict-waiver language was clear enough to be effective. Even so, it was not clear enough to avoid costly and time-consuming litigation, and the firm’s victory was not a foregone conclusion. On the contrary, the dissenting judge, finding the waiver language “neither clear nor indisputable,” would have denied it effect. In re Shared Memory Graphics LLC, 2011 U.S. App. LEXIS 19414 (Fed. Cir. Sept. 22, 2011).

Notwithstanding lawyers’ evident interest in making their agreements with clients clear enough to be enforceable, one can imagine reasons why their efforts might fall short. Sometimes, lawyers may worry that, if their clients are given a better idea of what they are agreeing to, they will say “no.” Other times, lawyers may want to hurry to sign up clients and begin billing their time. In the long run, though, slipshod engagement agreements may be bad for business. Prospective clients may be prompted to wonder, “If this law firm takes so little care in representing itself, how much care will it take in representing me?”