Legal Ethics Committee
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 ... September/October
David Gavin ... 301-279-2700 ... firstname.lastname@example.org
Allen Katz ... 301-840-8007 ... email@example.com
Sam Shapiro ... 301-340-1333 ... firstname.lastname@example.org
Court of Special Appeals Empathizes With Firm Forced to Represent Non-Paying Client
It’s happened again. You sent your client a bill, and a month later there still is not a check in your mailbox. The past-due balance is growing. You can feel your frustration rising. It is late in the case. Trial is ten weeks away. You have other cases. Cases for clients who honor their promise to pay. Do you send a letter to the client and stop working on the case until they pay? Can you ethically drop this bad client? Is the court going to permit you to? If you can drop the client, how do you navigate the Rules and make your best case to the court?
A recent Court of Special Appeals1 opinion provides helpful guidance.
In the case, the retainer agreement required the client to pay an initial retainer of $1,500 and maintain a minimum balance of $500 in the account. It also included a provision enabling the firm to withdraw its appearance if the client failed to make timely payment of the outstanding balance.
The firm represented the client for ten months, filing motions and exchanging discovery materials. Despite the clear language of the retainer agreement, the client failed to pay the firm’s regular invoices. Two and a half months before trial, the firm sent its client a letter stating he owed more than $28,000 in fees, the majority of which accrued six months prior. The firm stated it intended to withdraw its representation “pursuant to [Md.] Rule 2-132.” Shortly thereafter, the firm filed a motion to withdraw. Several days later, the client’s opposing party filed a motion for summary judgment in the pending lawsuit.
The circuit court denied the motion to withdraw, stating that two months was not sufficient time for the client to find new counsel before trial. Immediately, the firm filed a motion for reconsideration. It lamented that the client had only paid $500 on a $28,000 bill, a good indicator the client would be unable to pay for a costly trial. The firm also noted that, because neither party in the litigation spoke fluent English, payments for interpreters and depositions would increase the firm’s financial hardship. In the meantime, the firm assured the court, it would respond to the motion for summary judgment to prevent injustice to the client. And the firm did so.
In response, the client sent a letter stating he would not have the time or money to retain another lawyer if the motion were granted. He argued that, notwithstanding the plain terms of the agreement, which established an hourly fee, the firm had told him verbally, “not to worry” about the invoices – that they would collect from the opposing party. The client also filed a complaint with the Attorney Grievance Commission. The circuit court denied the motion, stating that the firm did not file promptly enough upon discovery of the delinquent payments. The trial judge disregarded the conflict of interest created by the client’s complaint to the Grievance Commission as inconsequential because the grievance concerned whether the attorney would be permitted to withdraw.
The firm immediately noted an interlocutory appeal and moved to stay the circuit court proceedings, which the Court of Special Appeals granted.
On appeal, the Court of Special Appeals noted there are two Maryland rules governing when a lawyer may withdraw from a case. Rule 1.16 of the Maryland Lawyers’ Rules of Professional Conduct (“MLRPC”) permits a lawyer to withdraw if the client has notice and “fails substantially to fulfill an obligation to the lawyer” or if the representation creates an “unreasonable financial burden” on the lawyer. Rule 2-132 of the Maryland Rules of Civil procedure provides that such a request shall be made by motion with the client’s consent or upon certain notice to the client.
For guidance in applying the rules, the Court turned to its decision in in re Franke.2 In that case, the Court considered four factors in deciding a lawyer’s request to withdraw for nonpayment: 1) the client’s failure to pay, 2) the unreasonableness of the financial burden to the lawyer, 3) the lawyer’s compliance with the notice requirements, and 4) the likelihood of undue delay, prejudice, or injustice.
Applying these factors, the Court held that the client’s payment of $500 on a six-month overdue bill of $28,000 was convincing evidence the client failed, and would continue to fail, his obligation to pay his lawyer. The Court further held that the firm complied with the required notice provisions. In addition, the Court held that, by giving the client notice of its intent to withdraw more than two months before the scheduled trial, the client had “reasonable warning that [the firm] would withdraw unless the obligation is fulfilled,” leaving the client “sufficient time to obtain new counsel or prepare for self-representation.”
Addressing the question of prejudice or injustice, the Court noted that the firm continued to represent the client by filing an opposition to the motion for summary judgment, which prevented the client from being unfairly harmed. Finally, the court disagreed with the trial court’s conclusion that the firm’s request to withdraw was not timely. The Court concluded the reason for the firm’s delay was that it attempted to establish a payment plan for the client. The Court held that it would be an injustice if the firm were penalized for trying to accommodate the client instead of attempting to withdraw at the earliest possible opportunity.
In conclusion, the Court held that the trial court “abused its discretion” in denying the firm’s motion for reconsideration. The denial of the motion “essentially forced the three-attorney firm to provide [the client] free legal services, with no promise of remuneration, which is an unfair burden on the firm.” The Court quoted a federal district court approvingly: “It simply expects too much of counsel to expend the additional energy necessary to go to trial and to front the necessary expenses, without any real assurance that he will be paid for any of it.” Accordingly, the Court remanded the case to the circuit court for entry of an order granting the motion to withdraw.
Lawyers sometimes worry that judges do not relate to the legitimate business hardships of practicing law. A $28,000 loss, compounded by the certainty of substantial additional costs, while not compelling to the trial judge, would be a terrible hardship to many. The admonition from insurance and ethics pundits is uniformly, “don’t let the client get behind on the bill.” Yet practical considerations often intervene. There is a relationship of trust. There is a sense of responsibility. It is easier than outside observers think for a careless (or opportunistic) client to take advantage.
The Court of Special Appeals’ opinion reflects a remarkable sense of empathy toward the law firm. It manifests an appreciation for the intractable predicament the firm faced - not merely the sunk cost, but the additional command to provide further zealous advocacy, for free, to a client who would never pay. To a practitioner, the payment and timing circumstances are enough to warrant such sympathy, but the grace with which the firm managed the affair also likely contributed.
The firm did not move to withdraw at the earliest opportunity. It attempted to accommodate the client by offering alternative methods of payment. In doing so, the firm sacrificed time – a risk because the passage of time could be, and was initially, held against it. The firm also acted prudently and efficiently to address the motion for summary judgment, all while expecting it would not be paid.
The firm treated its client with decency, in circumstances where the firm probably felt it was not receiving the same in exchange. This did not pay off at the trial level. But the Court of Special Appeals noticed. And in noticing, the Court resolved not just the withdrawal but, for substantive purposes, the grievance as well. By this opinion, the Court reminds us that you may still use your judgment in dealing with clients. You can, but you do not have to, hasten to withdraw at the first indication of non-payment or trouble. And if you do extend accommodation to your client, you do not have to expect that being decent will be held against you.
Regrettably, the Court did not designate its opinion for publication. This means it may not be cited in any Maryland Court as precedent. The Franke opinion is still useful precedent. And, perhaps, the unpublished Cooper & Tuerk opinion will make the rounds informally to contribute to a pragmatic “common law” informing judicial discretion governing similar circumstances.
1 In re: Motion to Withdraw by Cooper & Tuerk, LLP (Md. App. 2018) - https://bit.ly/2OzCBDx.
2 207 Md. App. 679 (Md. App. 2012)
Edward E. Sharkey, Esquire
Samuel M. Shapiro, Esquire
P. David Gavin, Esquire
Allen J. Katz, Esquire