Would you start a personal relationship without talking about expectations, preferred communication styles, and what you can (and can’t) offer the other person? For most of us, the answer is of course not. Yet, as lawyers, we sometimes hurry through the courting process when starting a relationship with a new client or expanding our representation of a current one.
It generally goes something like this: The new client is referred to you, or a current client calls you in a panic. Sometimes even before you have had a chance to clear conflicts, prospective or current clients launch into a discussion or send you emails regarding their situation. It took me a few years into my practice to feel really comfortable putting up the stop sign and gently redirecting the conversation, while acknowledging that their issue is definitely important and one I will handle if conflicts clear and we both agree that I’m the right fit for them. If there is any doubt that you can or want to take the case, be careful with this first contact. Case law generally construes a lawyer’s fiduciary duty broadly—even during preliminary consultations. And when you refuse the representation, be sure to promptly send a declination letter and consult ethical rules for possible duties regarding confidential information.
So, conflicts cleared; now what? A good way to kick off a positive relationship with a new client while significantly reducing the risk of a malpractice or disciplinary action is to simply spend time at the beginning listening to your new client and discussing with the principals what they expect from the relationship. If they are sophisticated consumers of legal services, ask them about their “points of pain;” that is, what their former lawyers did that they didn’t like, what they got right, and so on.
By “discuss the relationship,” I mean offer up an old-school conversation—face to face or over the phone. Odds are the majority of your communications going forward will be through email, so this may be your best opportunity to really get to know your new client. Picking up the phone at the very beginning of the relationship and offering to meet at the client’s home or office puts the client in the driver’s seat from the get-go. Let’s face it: We’re lawyers and are accustomed to being in charge, so this may not come naturally, but by this small act of deference, you have set the tone and shown you prioritize your client’s preferences. Having spent nearly my entire career advising and defending professionals in malpractice and professional negligence cases, I’m still amazed at how the simplest act—picking up the phone or offering to meet the client at a place convenient for the client—is avoided or overlooked by most lawyers. Often, when clients claim malpractice, their dissatisfaction arose early on due to a perceived lack of responsiveness and poor communication.
Legal Services Agreement
Once preliminary discussions have occurred, the next step is for the lawyer to memorialize the relationship in a legal services agreement. For what it’s worth, the term “fee agreement” is a misnomer because all terms governing the relationship, not just the fee, should be in one contract between the lawyer and the client.
Initially, remember that it isn’t only about fees. Think about the scope of the representation. Even in sophisticated matters where a premium fee is appropriate and the client agrees, this fee will never come close to compensating a lawyer for the opportunity costs and time spent defending against a malpractice claim, not to mention the personal stress. No doubt the nonpayment of legal fees is a big issue that plagues our profession, and the way in which fees and expenses will be earned and billed must be documented in a legal services agreement. But I recommend taking a step back and ensuring that you and the client are aligned on the scope of the engagement before putting pen to paper to document it, especially before you quote a fee. Clients want to know early on how much you are going to charge, so understanding the scope of what the engagement will entail is imperative. This includes, for example, which practice groups will work on the case, whether your colleagues are in the same market as the client or will have to charge fees higher than what the client is accustomed to paying, and whether the matter requires a retainer or fee guarantor. Aligning with the client on the scope of representation has to come before you can answer the client question “How much is this going to cost me?”
We often think of rates in terms of setting a standard one—what we charge most or all clients. Generally, how much you can and should charge your client hinges on the scope of the representation, your client’s expectations, and, of course, applicable laws and state bar rules. No doubt you will want to be prepared on that first call to discuss fees as well as general information on retainers and alternative fee arrangements, but I encourage you to resist setting fees and retainers until you have had an opportunity to get your arms around the nature of the representation and have had time to talk to the lawyers at your firm who will be servicing your client. There is nothing wrong with suggesting a follow-up call or email with the client, who will appreciate the fact that you want to provide information that’s as accurate as possible.
In designing a legal services agreement, resist the urge to reflexively use what has always been used. Whether they have been practicing law for decades or are newly licensed, lawyers shouldn’t use a form contract if it hasn’t been updated in more than a few years. How do you know that what has always been used is actually effective? I’m reminded of a conversation I recently had with a friend who was telling me about her will and how it was so well drafted. Given the fact that she is (thankfully) still alive, I was a bit skeptical because the will had not been subject to judicial review or probate. Same goes for any agreement. Unless the form you’re using contains terms that have been interpreted favorably by a fact finder or explicitly blessed by your local bar, you shouldn’t consider it bulletproof simply because it has been around forever. The best any lawyer can do is to keep the agreement simple and easy to understand and routinely consult bar and model rules to ensure it contains required language and doesn’t run afoul of any rule or regulation. What follows is a checklist to evaluate your current legal services agreement.
Summary of Engagement
To begin with, consider adding a summary of the engagement to the first page of your agreement. I’ve done this for years, and the feedback from clients has been very favorable. The summary is also a good resource for your back-office team in that it contains client contact information, rates, and the like. Think of the summary as a quick-start guide that accompanies a new electronic gadget. One day you may read the entire pamphlet that came with your new purchase, but the handy one-pager is what you look to first for key information. The summary should be concise, just as brevity is preferred for each topic covered in the body of the agreement.
The summary should start with the effective date of the agreement. This eliminates the ambiguity that sometimes crops up when the parties discover they disagree on exactly when the representation began—something that doesn’t matter until the client suffers harm during a time when it mistakenly believed it was represented. It’s like a spare tire—you don’t need it until you really need it. There is almost always a gap between the date a client signs the agreement and when the lawyer executes it, so don’t rely on the dates in the signature block. Believe it or not, an entire body of law deals with this issue, generally relating to blown trial and appellate deadlines. Lawyers need to be extra vigilant with email communications. Absent a clear meeting of the minds documented in a well-drafted agreement, the client’s (or non-client’s) perception and reliance is given considerable weight, often at the expense of the lawyer.
The summary should also list up front the name of the individual or entity you’re representing. Somehow, identification of the actual client is occasionally absent or ambiguous. There is nothing more detrimental to your case when being sued by a non-client than lacking proof that you weren’t actually representing the claimant now arguing for client status. This often arises when the non-client is the client contact—perhaps an officer, owner, or managing partner. Consider the paper trail created each time the principal receives an email and the word “you” is used when the lawyer really means the client. This is particularly of concern with closely held entities, where the lawyer has been hired by one or more principals to represent the entity. Best practices include specifically naming the client in the summary and including clear disclaimer language, for example:
Our engagement is limited to the client identified in the Summary of Terms as a separate and distinct entity from any of its directors, managers, officers, employees, individuals, owners, members, shareholders, partners, affiliates, agents, or other constituents of the client. We are representing only the client, even if an individual other than the client is designated as the Client Contact or Fee Guarantor, or is an owner of the client.
Also, references in the agreement to “assist client with general business matters” or “provide general legal advice” should be avoided or disclaimed because these provisions have been used to support the client’s expectation that a lawyer is looking out for the client in all aspects of the client’s business.
Be specific and include language such as “and other matters as may be agreed upon in writing between client and firm from time to time.” If there is no project the client wants you to get started on, be clear in the summary to include the language above and get written authorization from the client before handling a new matter. Many times when I’ve done this, the client has sent an email back clarifying the scope of what the client had asked earlier. Your request to confirm your understanding of the matter you have been asked to handle is the best way to ensure that everybody is on the same page.
The summary should also contain the client contact’s name, email and physical addresses, phone number, and any other contact information provided by the client. This is the individual directing your work on behalf of the client. You may also choose to list accounting instructions provided by the client for the delivery of your invoices. Similarly, list the names of the lawyer or lawyers responsible for the relationship with the client. This is usually the billing or relationship partner. Larger clients whose matters involve multiple practice groups appreciate having a list of the lawyers assigned to provide legal services in each practice area, e.g., Jane Doe—Litigation; John Williams—Employment; Ann Walsh—IP. In the body of the agreement, consider stating, “Using our professional judgment and with your permission, we will assign your legal work to our attorneys and other personnel whose skills and experience we consider appropriate for the engagement.”
Moreover, the summary should distinguish between an initial retainer and any replenishing retainers. Insert the amount of the initial retainer, and if you decide not to require one but want to reserve the right to do so later, use language such as:
Retainer waived; however, the firm may find it necessary to require a retainer(s) should we be hired in connection with litigation or IP matters. For example, filing fees, trademark search reports, etc., incurred by us on behalf of the client may require a retainer from the client or for client to pay such fees in advance of filing.
Also insert the amount of any replenishing retainer and details explaining when and how the client’s funds will be deposited into your IOLTA account to cover future fees and expenses. Be sure to consult applicable bar rules.
Don’t forget to specify fees in the summary. Consider including a statement such as “____ /hour for Responsible Attorney(s). Rates may differ for other attorneys at the firm who practice in specialty practice areas or certain geographic regions. The client will always be informed and consent to such rates before any work is performed at such rates.” You may also want to include language in the body of the agreement providing that the client agrees to the fees contained in the summary, that rates may increase during the course of the engagement, and that certain attorneys at the firm may charge a higher rate than is contained in the summary given their specialty or the geographic market.
Also include in the summary the name of any individual or entity who will be guaranteeing payment of the client’s invoices. The guarantor should sign the agreement in addition to the client and lawyer.
Finally, you may want to add a “special provisions” section to the summary. Here the parties can document miscellaneous, nonstandard terms important to the relationship.
The Body of the Agreement
Once the summary is done, you can turn to the body of the agreement. The old adage that less is more applies here too. The topics covered may vary greatly based on jurisdiction, the type of representation contemplated, lawyer and client preferences, or law firm policy. For example, some lawyers may choose to strike the late payment interest provision from their agreements. Often, providing for a guarantor makes no sense. Don’t hesitate to revise the agreement based on the particular facts of the representation. Consider including the following in the body of the agreement:
- Use of non-firm personnel. Addresses the engagement of local counsel, paralegals, expert witnesses, and other professionals who are not employed at the firm. This memorializes the client’s consent to use professionals outside the firm and to the disclosure of information as needed for performance under the agreement. You might also want to add terms indicating how the lawyer will share information about the client.
- Local counsel and associates. Addresses the coordination of lawyers and professionals in other jurisdictions.
- Costs. Addresses the reimbursement of out-of-pocket expenses for items such as filing and recording fees, court reporters, deposition transcripts, computerized legal research, notary service, legalizations, overnight or special delivery service, postage, commercial photocopying, bank wire fees, travel, lodging, and meals.
- Termination. Addresses the rights of client and lawyer to terminate the engagement. This is a good place to discuss that the termination of the engagement does not relieve the client of the obligation to pay for fees and expenses incurred or due before termination and during an orderly wind-down of legal services.
- Invoices. Addresses the manner in which the lawyer will bill the client and the acceptable method of payment. Consider excluding specific information like bank routing and account numbers for security reasons and because the information could change. Simply state that the client will pay according to the terms of the invoice. You may also want to include language (i) encouraging the client to discuss freely any aspect of the invoice, (ii) stating that you consider the entire invoice acceptable to the client, and (iii) waiving the client’s right to challenge any invoice after 30 days.
- Late payment and right to withdraw. Addresses the lawyer’s right to assess a monthly service charge for all past-due fees and expenses for invoices not timely paid under the terms of the invoice. This section in particular should be heavily scrutinized to ensure it complies with rules and regulations governing the lawyer-client relationship. Lawyers may wish to include language regarding their right to withdraw for nonpayment and to place a lien on proceeds to cover any unpaid balance.
- Fee guarantor. State that any person or entity named and signing as a fee guarantor unconditionally guarantees the fees and expenses due by the client. Consider adding language making clear that there is no attorney-client relationship between the firm and the guarantor of the fee unless the guarantor is also identified as a client in this or another agreement.
- Privacy consent. Addresses the client’s authorization for the lawyer to list the client on the law firm’s public client list and use the client’s name and logo in the firm’s marketing and related materials, including on the firm’s website.
- Document retention and work product. Addresses how original documents will be stored by the lawyer and how the client file will be maintained. You may also use this section to obtain client consent to the lawyer’s ownership of work product, subject to professional responsibility obligations.
- Client cooperation. Addresses the client’s agreement to promptly respond to requests to provide information and documents related to any work the lawyer performs on the client’s behalf. The lawyer may also want to disclaim liability for confirming the accuracy of information provided by the client.
- Electronic communications and cloud services. Addresses the client’s authorization for the lawyer to transmit confidential information via email and the client’s agreement to the lawyer’s use of third-party commercial cloud services for electronic storage and communication of client information.
- Third-party demands for documents. Addresses how the lawyer will handle third-party requests or demands by subpoena for documents or information related to the representation of the client.
- Conflicts and waiver. Addresses how the lawyer will handle conflicts and waivers.
- Assignment prohibited and no guarantees. States that services provided by the lawyer are personal services and that the agreement is not assignable by either party. This is also a good place to state that the lawyer cannot ensure that a favorable result will be obtained—an especially important disclaimer in litigation and intellectual property matters.
- Governing law and dispute resolution. Addresses governing law, venue, and how disputes will be resolved.
- Required notices to clients. Lists jurisdictionally required notices that must be included in agreements. This language usually involves reference to the state bar and a toll-free number for clients to call with complaints.
Also consider a concluding paragraph. It’s always nice to thank your client for the confidence that has been placed in you and your firm. You can also use a final paragraph to request that the client sign, scan, and email the agreement to you (with a reminder to send the initial retainer). The best practice is to request that the client sign two originals of the agreement and mail one back to you for your records.
Legal services agreements have historically been template-driven documents used to address fees. But because the agreements govern the entire relationship between counsel and client, lawyers should strongly consider covering topics that are ordinarily left unsaid and often lead to costly disputes.