New Case Approval & Retainers
Rules Governing Authority To Accept New Matters And Clients
Our ethical responsibilities to potential clients are very detailed. It is far too easy to inadvertently form an attorney-client relationship and become subject to rigid and unyielding duties which, if breached, can lead to malpractice liability. The rules of the Firm set forth below are designed to protect you, the Firm, and potential clients from a host of unintended consequences.
Please read the external references linked below for further detail on the subject of formation of attorney-client relationships.
- The Attorney-Client Relationship: Exploring the Unintended Consequences of Inadvertent Formation — University of Detroit Mercy Law Review, Winter 2009
- Existence of Attorney-Client Relationship— 48 Am Jur Proof of Facts 2d 525 (updated 2017)
- A Lawyer’s Duty to A Prospective Clients — Restatement (Third) of the Law Governing Lawyers § 15 (adopted in Colorado by Allen v. Steele)
- Allen v. Steele, 525 P.2d 476 (Colo. 2011)
No attorney may accept any case from an individual or corporation not previously represented by this firm without prior authorization from Brett Godfrey. When this policy is expanded to include authorization by others, it will do so expressly.
We must ensure the absence of conflicts of interest, and proper financial security to prevent uncollectable charges. We also prefer to exercise discretion relating to the nature and quality of our clientele.
This requirement does not apply to new matters from established clientele with whom we regularly do business (such as insurers and corporations that have previously been approved as clients per this Policy), but a thorough conflict check must be performed before accepting any new assignment.
All matters for individual or personal clients must be pre-approved even if we have taken other matters for that individual in the past. Some of the key indicators related to the decision to extend this approval will be the individual client’s track record in prompt payment of fees, the ethical status of that client and our general trust in that person.
Of course, this financial liability is knowingly accepted by the Firm if the required advance approval is obtained, and the generating attorney will thereafter have no personal risk or liability for un-collectable fees, unless that attorney has knowingly misled the Firm (by concealment or misrepresentation) in connection with material information related to the engagement.
Reasons For Rule
Because we provide financial incentives for attorneys to generate new business for the Firm, we sometimes face a problem that is created by the fact that lawyers sometimes want the Firm to gamble on the proposition of accepting risky or potentially undesirable clients. Taken in isolation, the Client Development Bonus would seem to present a “no-lose” bet for a lawyer. Younger lawyers in particular, seeking to rapidly escalate their status in the Firm by becoming rainmakers, have in the past been heedless in exposing the Firm to risk as a means of attaining this goal. For this reason, we shift the financial burden and risk to the attorney who takes on a new matter without the approval required herein if that client or case results in loss of collections for time spent or costs expended.
Approvals given subject to the payment of an advance or retainer are only valid if the retainer is paid and the terms of the approval are kept in force by the generating attorney. If the generating attorney fails to secure the retainer upon which approval is conditioned, then that attorney will be considered to have failed to obtain the approval.
Often the Firm will require substantial advance deposits (sometimes mistakenly referred to as ” retainersRetainer is a term that traditionally referred to a fee charged by a lawyer to remain available to client for future representation. The legal work itself was billed separately. Rules governing the reasonableness of fees have deterred this practice, as no services were covered by the retainer. ” but more properly termed “advances”) before accepting matters from individuals and small businesses on an hourly basis.
The amount of the retainer must be sufficient to cover the first 2-3 months of estimated hourly billing, or long enough for the client to receive and pay a bill. Subject to occasional exceptions, the client will be asked to pay our bills and the retainer will be kept separately as security for the Firm, unless the amount of the retainer was intended to cover the bulk of the fees for the entire matter.
Rain-making does not involve landing non-paying business. We have often encountered problems when attorneys on the verge of landing a new client seek approval of a low retainer; the argument advanced by the originating attorney is that a large retainer will “scare away” a client who cannot afford to pay it. The purpose of setting higher retainers is to do exactly that. Clients who are not motivated to pay in advance are even less motivated to pay when the legal matter is behind them and the legal services have already been provided. Clients who have accumulated a large legal bill often try to find ways to criticize the services we have provided as a means of escaping or minimizing their financial obligations. The situation is even worse if we should actually fail to achieve the client’s goals to any degree. Therefore, the Firm’s decisions on the amount of a retainer, while subject to initial dialogue with the generating attorney, are final and binding on the generating attorney. The amount of the retainer is to be set forth on the New Matter Approval Form.
Types of retainers. A retainer, typically, is a fee advance. It is intended to secure the client’s payment of fees for future services. The professional earns the fees by performing professional services for the client, bills the client on a monthly basis, and then draws down the retainer to pay himself or herself the earned fees. The typical engagement letter provides for this, although it often has misleading language that calls the retainer property of the professional. One variant is the “evergreen retainer,” which comes in two forms. In the first form, the client is to pay regularly and the professional will not tap the retainer for payment until the final bill is due or, in bankruptcy representation, until the final fee application is approved by the court. In the second form, the professional regularly draws down from the retainer and regularly requires that the client replenish it.
It is imperative that all new matters be documented by an engagement letter stating the scope and terms of our engagement in clear, concise and unambiguous language.
Haste in drafting engagement letters has been the source of countless successful malpractice actions against attorneys and firms, and has on occasion resulted in formal disciplinary action against attorneys. Many examples are found in the External References linked above.
The purpose of an engagement letter is to document the nature, scope and terms of the Firm’s retention, and to serve as a written contract when the engagement letter is counter-signed or electronically approved and acknowledged by a prospective client. The Firm uses approved, standardized form letters for this purpose, but the specific terms and conditions of the letters must be reviewed from beginning to end by an attorney and approved by the Firm as specified above before being sent to a client or prospective client.
It is extremely important that the engagement letter specify all details and expectations regarding how the retainer will be depleted and replenished.
Careless language in emails, text messages or verbal discussion. Lawyers are commonly sued for malpractice by clients who have been led to believe that the scope of representation is broader than the attorney intended through the use of sloppy or imprecise language in email and text messages, as well as verbal conversations. Worse, lawyers are occasionally sued by clients who know better but who wish to capitalize upon a lawyer’s mistake for the client’s own financial gain. Do not leave yourself or the Firm open to such claims. Do not leave room for interpretation in any of your communications that pertain — even indirectly — to the scope of work the Firm will perform for a client.
Even an apparently benign social nicety in a communication to a prospective client such as “I look forward to working with you” could be interpreted as an outright acceptance of a legal matter with no specified boundaries on the extent of a lawyer’s duties thereafter. The time for such pleasantries is after the engagement letter is signed, at which point the attorney and the firm, as well as the client, are protected by clear and unequivocal statements of the scope and terms of representation.
Silence in the face of ambiguous communication from others. The formation of an attorney-client relationship can be inferred from a lawyer’s silence in the face of communications from prospective cleints that are ambiguous on the issue of what the client expects from a lawyer. An example: A potential or actual client writes text message to attorney after vaguely referencing a business problem in passing during a conversation on another topic. The message says something that appears benign but which is ambiguous, such as, “I feel so much better after talking to you,” or “victory will be sweet,” (which could pertain to the matter actually being handled by the attorney or the unrelated business problem the client referenced. The lawyer must not let those types of communication pass without a return communication, kept permanently in email and archived documents (as well as a return text message, which by itself would not be sufficient), clarifying the scope of representation. Even something as simple as, “Do you want to discuss retaining us on the matter you mentioned today? If so, let me know. As you know, we must document all new matters in detail per firm policy before undertaking new matters even for existing clients, and at this point we have not been hired in relation to that issue” may suffice.
With respect to what you say to others, always ask yourself (with a tinge of paranoia), “How could my words be construed to expand the scope of work I am to perform beyond what I actually intend?” Filter yourself accordingly, for everyone’s protection.
Pro-Bono Legal Work
All pro bono legal work must be approved in advance by Brett Godfrey.
The Firm does not provide tax advice. This must be made clear at every potentially relevant juncture to clients and prospective clients. No special language is necessary, but the following provides a convenient example:
This Policy should not in any way deter or diminish your marketing efforts, which should be a top priority so that we may continue to draw desirable clients. Indeed, the purpose of this Policy is not to deter bringing new business into the Firm, but merely to ensure that the ethical commitments we make are profitable (unless pre-approved as authorized pro-bono work, as set forth below), free of conflicts of interest, and compatible with the commercial, ethical and business practices of the Firm.