Why non-engagement letters are helpful

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Published on 10/1/07

This is the first of two parts. Part II will run next week.

We have regularly emphasized in this column the importance of having a signed engagement letter for a new client, stating each party's responsibilities for making the engagement a success.

The basics of such a letter are simple. The lawyer agrees to perform to the best of his or her ability in accord with professional standards, and the client agrees to communicate and cooperate fully — which includes paying the bill.

Going through this process of detailing and negotiating to prepare the engagement letter enables you to avoid a client with unrealistic expectations or demands, and who believes that your estimates, whether of time or outcome or costs, are guarantees instead of informed estimates.

Discussing engagement terms will frequently uncover the client that will in the future express irritation with delay, who will chronically complain about everything, who will demand constant or instant attention, or who expects unrealistic or abnormal hand-holding.

In large firms, when such a troubled relationship develops, the overall cost of a bad client relationship to each partner is minimal. Lawyers in small firms or in sole practice see an immediate reduction of take-home pay.

Large and small firms alike often continue to work for the problem client in the misguided hope that continuing the relationship means getting paid and receiving referrals in the future. However, clients respect firmness and a businesslike approach, and generally do not go out of their way for lawyers they disrespect.

That's why sending a non-engagement letter, telling the client you are breaking off the relationship, is a smart move. Non-engagement letters provide necessary warning that you are cutting ties with a client.

Lawyers cannot ethically cease representation when the client will be prejudiced — for example, by withdrawing within 60 days of a court date.

In the ABA's Code of Professional Conduct, Rule 1.16 ("Declining or Terminating Representation") allows lawyers to withdraw if "the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled." Massachusetts' rule is similar.

If you try to withdraw without adequate communication and careful records of the client's billing and payment performance, the result may be a disciplinary action requiring future "involuntary servitude" to fulfill your ethical obligations toward the client.

Consistent with the Rules of Professional Conduct, state in your non-engagement letter that you will stop work and that the client must pay for work done to date.

In a collection situation, it is important to do whatever is necessary to resolve the conflict. Clients who argue about over-billing are often just angling for a discounted bill. If, after all other efforts to collect have been exhausted, the client is merely interested in a fee discount, give it. Do it to get rid of the matter — and the client. That way you are not paying collections staff to keep flogging the matter, and are much less likely to be sued for malpractice.