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   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

Legal Ethics Hotline Volunteers ... May
Bill Chen ... 301-279-9500... wjc@cwtm.net
Sam Shapiro ... 301-340-1333 ... rogah@aol.com

 
Moving to withdraw when your client owes you money – In re Franke, 207 Md. App. 679 (2012) and the effect of ABA Comm. on Ethics & Prof’l Responsibility Formal Op. 476 (2016).

You have been representing a defendant in civil litigation for many months. You’re two months away from trial and are owed more than $120,000 in legal fees. As there is no realistic chance you will be paid, you send your client written notice that you will move to withdraw your appearance. Two weeks pass and you file your motion to withdraw.

That was the scenario facing the Court of Special Appeals in In re Franke, 207 Md. App. 679 (2012). In his motion to withdraw, the attorney said he was owed more than $120,000, but had stayed in the case because he was afraid his client would be prejudiced if he withdrew while discovery and a motion for preliminary injunction were pending. He cited other steps he had taken to minimize harm to his client, including his efforts to settle the case. He also mentioned there were “other reasons for the “withdrawal,” which “created a conflict making continued representation problematic.” Id. at 684 (internal quotation marks omitted).

The circuit court denied the motion, but the Court of Special Appeals reversed, holding that the lower court had abused its discretion in rejecting the request to withdraw. The appellate court explained that Rule 1.16(b)(5) of the Maryland Rules of Professional Conduct allows a lawyer to withdraw from representing a client where the client “fails substantially to fulfill an obligation” to pay her lawyer. Similarly, Rule 1.16(b)(6) allows withdrawal where continued representation “will result in an unreasonable financial burden on the lawyer.” Id. at 690 (quoting Rule 1.16(b)(5) and (6)). The Court of Special Appeals concluded that both grounds existed. Plus, the requirements of Md. Rule 2-132, governing motions to withdraw an appearance in the circuit courts, had been met. Thus, the circuit court should have granted the motion to withdraw. No one, however, questioned whether a lawyer’s duty of confidentiality restricted what could be said in a motion to withdraw. Therefore, the court never raised, mentioned, or discussed that issue.

At the end of last year, in Formal Opinion 476 entitled “Confidentiality Issues when Moving to Withdraw for Nonpayment of Fees in Civil Litigation,” the ABA’s Committee on Ethics and Professional Responsibility addressed that issue, suggesting that lawyers seeking to withdraw should be circumspect in their initial motions to withdraw. The Committee prefaced its opinion with these observations:

In moving to withdraw as counsel in a civil proceeding based on a client’s failure to pay fees, a lawyer must consider the duty of confidentiality under Rule 1.6 and seek to reconcile that duty with the court’s need for sufficient information upon which to rule on the motion. Similarly, in entertaining such a motion, a judge should consider the right of the movant’s client to confidentiality. This requires cooperation between lawyers and judges. If required by the court to support the motion with facts relating to the representation, a lawyer may, pursuant to Rule 1.6(b)(5), disclose only such confidential information as is reasonably necessary for the court to make an informed decision on the motion.

 

ABA Op. at 1 (emphasis in original).

          The Committee first acknowledged that ABA Model Rule 1.16(b)(5) allows a lawyer to withdraw where “the client substantially fails 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.” Id. (quoting the Model Rule) (internal quotation marks omitted); accord Md. Rule 19-301.16 (b)(5). The Committee noted that Comment 8 to that Rule states: “A lawyer may withdraw if the client refuses to abide by the terms of an agreement relating to the representation, such as an agreement concerning fees or court costs . . . .” Id.at 2 (quoting Comment 8) (internal quotation marks omitted); accord Comment 8 to Md. Rule 19-301.16.     

          The Committee opined that, in any motion to withdraw, “a lawyer must consider how the duty of confidentiality under Model Rule 1.6 may limit the information that can be disclosed in the moving papers.” Id. at 2 (footnote omitted). That duty prohibits a lawyer from revealing “information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).” Model Rule 1.6(a); accord Md. Rule 19-301.6. The exceptions provided by paragraph (b), however, permit “disclosure only to the extent the lawyer reasonably believes the disclosure is necessary to accomplish” the objective of the specific exception. Comment 16 to Model Rule 1.6; accord Comment 6 to Md. Rule 19-301.6. The Committee then posed the “more difficult question,” i.e., “when is a lawyer permitted to disclose any confidential client information in filing a motion to withdraw, and if so, how much.” ABA Op. at 3. (emphasis in original).

          Specifically, what may a lawyer disclose when moving to withdraw from a civil case based on the client’s failure to pay legal fees? The Committee recognized “that some disclosure of confidential client information otherwise protected by Rule 1.6(a) is permitted in fee-collection suits by lawyers, based on the ‘claim or defense’ exception in Rule 1.6(b)(5),” and that “motions to withdraw based on a client’s failure to pay fees” are similarly grounded. Id. at 3-4. The Committee had earlier noted that “in In re Gonzalez, 773 A.2d 1026 (D.C. 2001), the respondent was given an informal admonition, not for informing the court that fees were owed by the client, but for also disclosing extraneous and embarrassing client information in connection with the motion.” Id. at 3.

After observing that “courts have differed widely” in their approaches to that question, the Committee quoted a portion of Comment 3 to Model Rule 1.16:

The court may request an explanation for the withdrawal, while the lawyer may be bound to keep confidential the facts that would constitute such an explanation. The lawyer’s statement that professional considerations require termination of the representation ordinarily should be accepted as sufficient. Lawyers should be mindful of their obligations to both clients and the court under Rule 1.6 and 3.3.

 

Id. at 4 (emphasis added) (citing N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Advisory Op. 1057 (2015), 2015 WL 4592234, at *3).  

          The Committee acknowledged, however, that “many courts have issued decisions that recite details as to the money owed by the clients, the specific legal services performed and related facts, indicating that the court required more from the lawyer than just a statement that the motion to withdraw was motivated by ‘professional considerations.’” Id. The Committee cited many cases, including In re Franke, where courts relied on those very types of details, but “did not address a lawyer’s duty of confidentiality.” Id.

          There is a significant flaw underling the Committee’s analysis. When it quoted Comment 3 to Rule 1.16, it omitted a crucial sentence, which appears immediately before the portion of the Comment quoted by and relied on by the Committee. Here is a fuller quote of that Comment, with the omitted sentence highlighted in bold:

[C]ourt approval or notice to the court is often required by applicable law before a lawyer withdraws from pending litigation. Difficulty may be encountered if withdrawal is based on the client’s demand that the lawyer engage in unprofessional conduct. The court may request an explanation for the withdrawal, while the lawyer may be bound to keep confidential the facts that would constitute such an explanation. The lawyer’s statement that professional considerations require termination of the representation ordinarily should be accepted as sufficient. Lawyers should be mindful of their obligations to both clients and the court under Rule 1.6 and 3.3.

 

(emphasis added).

But where a lawyer moves to withdraw because the client has not paid the lawyer, the withdrawal is not “based on the client’s demand that the lawyer engage in unprofessional conduct.” Consequently, the portion of Comments 3 relied on by the Committee – discussing a lawyer’s need to keep confidential the facts supporting the request for withdrawal, and endorsing a simple reference to “professional considerations” – is simply not relevant.

Earlier in its Opinion, the Committee also failed to adequately distinguish a withdrawal for failure to failure to pay fees from a withdrawal based on other grounds. It had noted the “tension between a lawyer’s obligation to provide the court with sufficient facts to rule on a motion and the lawyer’s duty of confidentiality.” ABA Op. at 3 (footnote omitted). In that omitted footnote 10, the Committee cited Byrd v. Mahaffey, 78 P.3d 671, 676 (Wyo. 2003), but Byrd did not involve a motion to withdraw due to unpaid legal fees. Instead, the motion to withdraw in Byrd was based on the client’s failure to communicate with and cooperate with counsel.  See Byrd, 78 P.3d at 675-76. Likewise, the New York Ethics Opinion cited by the Committee did not discuss motions to withdraw based on a failure to pay fees.    

Based on its view of a lawyer’s duty of confidentiality, the Committee urged judges “to balance their need for information about the facts underlying the motion with the client’s right to confidentiality,” and reminded lawyers of their duty to protect their client’s right of confidentiality. ABA Op. at 6, 7. The Committee recommended the following procedure:

Thus, in order to comply with Rule 1.6, a lawyer who has a good faith basis for withdrawal under Rule 1.16(b)(5) and/or 1.16(b)(6), and who complies with the applicable procedural prerequisites of the court for such motions, could: (1) initially submit a motion providing no confidential client information apart from a reference to “professional considerations” or the like; (2) upon being informed by the court that further information is necessary, respond, when practicable, by seeking to persuade the court to rule on the motion without requiring the disclosure of confidential client information, asserting all non-frivolous claims of confidentiality and privilege; and if that fails; (3) thereupon under Rule 1.6(b)(5) submit only such information as is reasonably necessary to satisfy the needs of the court and preferably by whatever restricted means of submission, such as in camera review under seal, or such other procedures designated to minimize disclosure as the court determines is appropriate. If the court expressly orders the lawyer to make further disclosure, the exception in Rule 1.6(b)(6) for disclosures required to comply with a court order will apply, subject to the lawyer’s compliance with the requirements of Comment [15].

 

Id. at 9 (footnote omitted); see Team Obsolete Ltd. v. A.H.R.M.A. Ltd., 464 F. Supp. 2d 164 (E.D.N.Y. 2006) (discussed at ABA Op. a5 5-6).

Again, the Committee’s analysis rests on a misreading of Comment 3 to Model Rule 1.16. Comment 3 addresses instances where a client directs a lawyer to engage in unprofessional conduct, thus causing the lawyer to move to withdraw. When a client fails to pay legal fees, however, the client has not directed the lawyer to engage in unprofessional conduct. While the procedure prescribed the Committee may be appropriate where a client gives the lawyer an improper directive, it does not seem appropriate where withdrawal arises from unpaid fees.

Moreover, in light of existing practices in Maryland’s circuit courts, the approach suggested by the Committee is simply not feasible in most cases. Given the realities of the civil dockets in many jurisdictions, courts are unlikely to engage in the back and forth described by the Committee. Nonetheless, there is some merit to the Committee’s concerns. After all, disclosing that a client is unable to pay her attorney’s fees could significantly prejudice her position in the pending litigation. Despite the Committee’s faulty reading of Comment 3, its concerns could deserve review and consideration by Maryland’s courts and Rules Committee.

Co-Chairs

Allen J. Katz
Samuel M. Shapiro

 

Committee Meetings

May 18, 2017

Meetings will be held at 4:30 p.m. on the 3rd Thursday of the month (September - May) in the upstairs conference room of the Bar Association building, unless otherwise noted.