Inside Track: You're fired! Ethical issues of a discharged lawyer:

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    You're fired! Ethical issues of a discharged lawyer

    Alex De Grand

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    A representation's abrupt end can leave lingering questions about a lawyer's fees and duties to a client. Ethics rules give clear answers to some, but not all, of these questions. State Bar Ethics Counsel Tim Pierce explains the ethics rules and court precedent to guide attorneys through the resolution of a representation in advance of his full presentation at the 2009 Wisconsin Solo & Small Firm Conference.

    Aug. 19, 2009 – A representation’s abrupt end can leave lingering questions under Wisconsin’s professional ethics rules.

    contractDoes a lawyer working on a contingency fee basis get paid when the client finds different counsel in midstream? How does a lawyer tell the court the reason for withdrawing from a representation without betraying the client’s confidences? Who owns the client’s file?

    The ethics rules give a clear answer to some, but not all, of these types of questions. During this fall’s 2009 Wisconsin Solo & Small Firm Conference, the State Bar Ethics Counsel Tim Pierce will explain the rules and court precedent to guide attorneys through the resolution of a representation. In advance of the full presentation, Pierce discussed some of the issues raised for InsideTrack.

    Right to payment vs. right to discharge

    A lawyer has a right to payment for services that exists in relation to the client’s near absolute right to fire the lawyer at any time for any reason. Accordingly, Pierce explains, a lawyer’s fee must be “reasonable” as that term is understood under 20:1.5 (a), avoiding any effect of penalizing a client for exercising his or her right to choose counsel.

    “Upon termination, a lawyer’s fees must be reasonable, and lawyers are obligated to return any unearned portion of advanced fees,” Pierce said. “What was a reasonable fee for representation to completion of a matter may no longer be reasonable or earned if the representation is terminated before completion.”

    Pierce notes that courts have generally allowed lawyers to only receive quantum meruit compensation when discharged without cause, regardless of contrary language in the lawyer’s fee agreement.

    Contingency fees

    “The most frequent area of contention with respect to fees upon discharge is in contingency fee cases,” Pierce continued. “In Wisconsin, the general rule is that a lawyer discharged without cause is entitled to the value of the contract minus the reasonable value of successor counsel’s services.”

    But if a lawyer is discharged for cause for failing to provide adequate legal services and has provided no value to the client, Pierce said, the lawyer is not entitled to any fees whatsoever. “This is true even if the lawyer has a statutory lien under Wis. Stat. §§ 757.36 to 757.38 because the lawyer has breached the contract giving rise to the lien,” Pierce added.

    Pierce noted that a lawyer received fees in quantum meruit because the client received some value even though the lawyer failed to provide adequate legal services in Lorge v. Rabl, 2008 WI App 141.

    “Further, in some circumstances in which a client would be unjustly enriched, the existence of an equitable lien for attorney’s fees has been recognized in Wisconsin,” Pierce said, citing In re Edl, 207 B.R. 611 (1997).

    Explaining a withdrawal to the court

    Another tricky area not fully addressed by the ethics rules concerns the balance between the lawyer’s duty of confidentiality to the client and the court’s need to know why a lawyer seeks permission to withdraw from a representation.

    Pierce said Comment [3] to SCR 20:1.16 suggests a “lawyer’s statement that ‘professional considerations require termination’ ordinarily should be accepted as sufficient.”

    “Lawyers, of course, may encounter judges who do not accept such an explanation,” Pierce said.

    “A practical approach is for the lawyer to consider the likely and foreseeable harm to the client and refuse to disclose damaging information on the grounds that it is prohibited by SCR 20:1.6,” Pierce said. “So, for example, a lawyer should refuse to disclose that the client has requested that the lawyer submit false evidence to the court, but may normally disclose that the client has failed to pay the lawyer as previously agreed.”

    “It is also worth noting that a lawyer is permitted to reveal otherwise confidential information pursuant to court order,” Pierce added.

    Who owns the file?

    “The failure of a lawyer to promptly provide a client file to the client or successor counsel upon request is one of the most common grounds for discipline,” Pierce said, offering as an example Disciplinary Proceedings against Phillips, 290 Wis. 2d 87 (2006).

    A file belongs to the client, Pierce said. “The client is entitled to the file upon request, regardless of whether the client owes the lawyer money or not,” he said, referring to Wisconsin Ethics Opinion E-00-03.

    Further, there is no attorney’s lien on a client file in Wisconsin. “In OLR Public Reprimand 2005-9, a lawyer was disciplined not only for failing to provide the file to the client upon request, but also for asserting a frivolous claim by claiming a lien on the file for unpaid fees,” Pierce said.

    “This requirement obviously also applies to any client property in the lawyer’s possession, not just files,” Pierce added. “Thus, if the lawyer holds any tangible property of the client or funds in trust, these too must be promptly provided to the client.”

    Alex De Grand is the legal writer for the State Bar of Wisconsin.