Category Archives: Engagement Letters

Fee Shifting with Non-Lawyers

As a general matter, the Rules of Professional Conduct prohibit lawyers from sharing fees with non-attorneys. However, there are certain exceptions to that rule. Rule 5.4 states that “a lawyer or law firm may include non-lawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement.” A recent case out of Pennsylvania describes how a non-lawyer attempted to put this exception into action, albeit unsuccessfully.

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Til Death Do Us Part: Prenuptial Agreements for the Professional

Engagement letters are a must. In case that wasn’t clear enough: all professionals should document the scope of the client relationship for each and every engagement. New clients and long-standing clients alike, engagement letters are a must. It’s a key aspect of best practices that is often overlooked. "My client and I have developed a trusting, professional relationship over the years and therefore it is entirely unnecessary to propose an engagement letter." It may feel a bit like a prenuptial agreement. Why plan for the worst when things are going so well?

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Contingency Fees from Former Clients

Many professionals work on a contingency fee basis. If they achieve a favorable result for their client, they receive a percentage of the profit; no win, no fee. The basic arrangement assumes that the professional will continue to represent the client throughout the duration of the matter. But what are a professional’s rights when a client decides to hire new counsel in the middle of a case?

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Referral Fees: The Logistics of Fee Sharing

Fee sharing is not unfamiliar to most attorneys.  Model Rule of Professional Conduct 1.5(e) permits lawyers who are not in the same firm to share or divide a fee.  A typical example is when an attorney refers a case out to “trial counsel”.  But, fee sharing has its restrictions. For example, the Model Rules permit fee sharing only when the fee is reasonable, the client agrees to the arrangement and the division of the fee is proportionate to the share of each lawyer’s services or the lawyers assume joint responsibility for the representation. These requirements create ethical implications for lawyers engaged in fee sharing. Fortunately, the ABA recently provided some guidance. 

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Representation Could Go Farther Than You Think  

Hired for A but sued for Z? It may be a more common problem than you think. In overturning a lower court’s decision granting summary judgment, the Appellate Division of the New Jersey Superior Court has added yet more fuel to the fire in the ever-evolving debate as to the scope of representation. In a recent decision, an appellate court held that an attorney tasked with a seemingly simple and defined engagement, may actually be on the hook for much more. This serves as an important reminder to effectively communicate with the client to ensure there is a consensus as to the scope and limits of the engagement.

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Fee Dispute Arises from Largest Med-Mal Verdict in CT

A law firm in Connecticut recently recovered the largest med-mal verdict ever in the state only to be sued by their client for malpractice. How does that happen? We’ll tell you. Plaintiffs retained a well-known Connecticut law firm (“Firm”) to represent them in a med-mal claim alleging that Defendant Doctor (“Dr.”) made significant errors during childbirth which caused Plaintiffs’ son being born with cerebral palsy. In 2011, a jury returned a verdict for Plaintiffs, and awarded $58 million – the largest medical malpractice verdict in Connecticut state history. Following verdict, the parties settled for $25 million.

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When Does the Engagement End?

It’s easy enough to determine the statute of limitations for a malpractice claim. It’s not as easy to determine when the limitations clock begins to click. In New York, for example, the limitations period is three years but courts have grappled with questions regarding when a relationship between attorney and client ends. Courts have more recently employed what’s become known as the continuous representation doctrine in order to extend the accrual time. However, a recent decision in the Southern District of New York highlights an about-face of sorts.

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Advance Conflict Waiver = Unenforceable

Even the most experienced of professionals cannot predict the future. So, as a risk prevention measure, many of us turn to the next best thing by agreeing to clear contractual terms with our clients so as to eliminate confusion down the road. We spell out the terms and scope of our engagement and we identify the client’s responsibilities in an effort to avoid problems before they arise. We attempt to reach agreements today that may impact us tomorrow. According to the ABA, conflicts of interest are one of the most common legal malpractice claims so some attorneys may be tempted to seek a waiver of future conflicts in their engagement letters. This practice does not work. Consider for example the following case out of California.

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Limitation on Liability Clause Not Enough to Protect Accountant

Here at PL Liability Matters we have written on numerous occasions about the importance of an engagement letter. The engagement letter is a critical tool for setting expectations and managing risks. As we have said before a well drafted engagement letter can deter malpractice claims and in meritless suits it can be “Exhibit A” to a dispositive motion. A case out of New York involving an accountant-client relationship demonstrates just that scenario. Unfortunately in this case, however, the court found that the engagement letter did not sufficiently limit the risk to the professional in order to avoid the malpractice claim.

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Risks of Client Indemnification Agreements

Professional consultation doesn't always go as intended. Despite good intentions, there are always risks facing professionals that the representation will turn sour and lead to a malpractice claim. Clients also face risks and some sophisticated clients take steps to reduce exposure. For example, more corporate clients are attempting to reduce exposure by requiring counsel to sign indemnification clauses within the engagement agreement. Many firms agree to represent clients pursuant to such clauses in order to develop or maintain business relationships, notwithstanding the additional risk. However, experts warn that doing so may make firms personally responsible for unforeseen liability, and that long term risk may not justify the short term gain.

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