Dear Fellow Members:
Below you will find a link to an online copy of the Maryland Rules of Professional Conduct. We have provided this link in hopes of making your search for answers to your legal ethics questions easier. As always, if you need additional guidance, please do not hesitate to call the Legal Ethics Committee hotline at the number listed in the current issue of your bar newsletter.
MD Rules of Professional Conduct
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Money, the root of ...
I recently had the privilege of speaking to our Association at a luncheon on ways to avoid disciplinary complaints and malpractice claims. In the course of those remarks I mentioned a form fee agreement and provided one which Cindy and Julie were kind enough to post to the BAMC website.
A couple of very good questions have been raised in light of that draft agreement, and my purpose in this article is to address the most interesting questions posed.
Obviously, no “form” is ever appropriate for use without careful review and thought, and the ‘Form’ fee agreement I provided is no exception. In crafting that document, I enlisted a number of my partners’ thoughts and we collaboratively tried to come up with a variety of scenarios that might benefit attorneys across a wide spectrum. Some of the provisions might not be a good fit for a certain practice or client, while others, such as the social media, attorney client and employer server provisions, might well apply uniformly. Take your time and carefully review the draft and then give some thought to whether your own agreement might be in need of some ‘fine tuning.’ If so, feel free to borrow those portions you think might work well for your particular practice or client base.
One of the questions I’ve been asked to address is the propriety of a client signing a promissory note, or a Deed of Trust, or providing any other form of security for payment of fees. It is helpful, initially, to bear in mind that the considerations involved are temporal. That is, different rules apply if the security is part of the initial engagement, as opposed to an ‘add on’ or change in the relationship of lawyer and client after its inception.
When a lawyer and potential client first meet, they are operating at arms length in determining whether they want to work with each other and, if so, on what terms. While a rule of confidentiality attaches to communications with a potential client, the parties are, nevertheless, viewed to be on a level playing field and are consequently able to negotiate on their own behalf. If the lawyer anticipates that the potential client will be unable to pay the anticipated fees, she may require an Indemnity Deed of Trust or some other form of security to assure payment before accepting the engagement. Ideally, the client is able to pay the lawyer as the fees are incurred, in which case the security is never called upon. We also highly recommend that the lawyer obtain a retainer. Obviously, all unearned retainers must be held in escrow until the fees are earned.
One option if the size of the retainer is difficult to gauge, or the client cannot provide a retainer large enough to cover all of the likely fees, is an evergreen retainer. In that situation, when the retainer balance falls below an agreed minimum, the client must either restore the retainer within a specified time period, or must pay the monthly bills promptly while the balance of the original retainer is maintained in escrow. Thus, the attorney is protected by maintaining a balance in escrow that is sufficient to cover future fees in the event the client fails to pay.
Unfortunately, not all clients can advance a large retainer. Many, particularly in family law matters, are financially dependent upon the other spouse, so that jointly held property is the best security. Those clients generally would be asked to sign notes or in some instances Indemnity Deeds of Trust, enabling the lawyer to assert a lien on jointly held property once the tenancy severs, and usually, if, as or when the property is sold.
Given the equal bargaining position of the prospective client and the lawyer at the inception of the relationship, the lawyer may tell the client that without security he is unwilling to get involved in the matter. It is then up to the potential client to shop around or accept the terms being proposed by the advocate he or she wants to hire.
Once the attorney client relationship commences, however, everything changes. At that point there is an agreement, and commitment on both sides to be so bound. If the lawyer is not being paid and wants to obtain additional security for payment, certain ethical constraints come into play. First, given the existence of the attorney client relationship, the client is looking to the lawyer for protection and advocacy. If a note or IDOT is proposed, the client MUST be advised in writing of the conflict of interest and of the client’s right to consult with an independent attorney before agreeing to the request for additional security. Many lawyers or firms who find themselves in the uncomfortable position of seeking to change the terms of the original retainer agreement wisely offer the client a credit on their bill to ‘fund’ the client’s retention of an independent attorney.
The appropriateness of seeking independent counsel and the nature of the conflict must be carefully explained so that the client has the benefit of full disclosure and can make an informed decision.
The request for security is often made with trial looming and coupled with the notion that the lawyer, absent some assurance of payment, simply cannot afford to expend more time unless there is assurance of payment. The case of Frederick R. Franke, Jr., 207 Md. App. 679 (2012), should offer the lawyer comfort but see Norman v. Sinai 225 Md. App. 390 (2015). While the client is not required to actually meet with another lawyer, we strongly recommend that you urge your client to do so in the strongest terms.
The other question put to me regards the charging of interest on unpaid funds owed to the lawyer, but not reduced to a judgment.
This can only be done if properly described in the initial retainer agreement. Candidly, I am not a fan of seeking to charge clients interest on unpaid professional fees. I would rather devote effort to crafting an agreement that can be honored rather than further commercializing our profession, but that is simply a preference. If interest on the unpaid fees is an afterthought that was not included in the initial retainer, the same problems arise.
Since the attorney client relationship is already in place, and hence the fiduciary obligations which accompany that relationship, the attorney may not simply alter the agreement. Before the client can agree to such a request, the attorney must fully disclose the conflict of interest and advise the client that it is both his right, and that it would be appropriate, for the client to seek independent advice before agreeing to change the terms of the retainer agreement.
I am pleased to have been assisted in drafting this “note” by my able colleague, Steve Cornelius, Esquire.
Eccleston and Wolf, P.C.
Allen J. Katz
Samuel M. Shapiro
Daniel L. Shea
May 19, 2016
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