Practice Points with Mark Scruggs: Improve Your Practice by Improving Your Engagement Agreement
I've written about this before, but I think it's important enough to touch on again. The engagement agreement is the first step to a good attorney-client relationship. Also, a good engagement agreement tailored to the representation can prevent malpractice claims and State Bar grievances. Setting forth the scope of engagement in your engagement agreement will better manage client expectations and avoid misunderstandings. Here are my top ten tips for an effective engagement agreement.
A written engagement agreement is always a good idea
Describe the scope of engagement: What do you agree to do?
Describe the scope of engagement: Who is your client?
Describe the billing procedures and fees
Do not use the words "non-refundable fee" in your engagement agreement
Describe office procedures for communication with the client
Consider addressing significant obstacles to success
Avoid superlatives and make no guarantees
Set out the grounds for withdrawal or other consequences for breach of the engagement agreement
Review with the client and have them sign the agreement
A Written Engagement Agreement is Always a Good Idea
The Rules of Professional Conduct require a written engagement agreement only in a contingency fee case. When the lawyer has not regularly represented the client, the State Bar encourages but does not require lawyers to have a written engagement agreement. My recommendation is to have something in writing in every engagement defining the scope of the representation. It is a smart move. It protects both the client and the lawyer. It makes the relationship clear to the client and memorializes the work scope, thus minimizing the chances of a misunderstanding or dispute. Even regular clients deserve an engagement agreement for each new matter. An email will suffice, but it is essential to define the scope of the representation to avoid any misunderstanding about what you are being retained to do and for whom.
Describe the Scope of Engagement: What Are You Agreeing to Do?
Circumstances might require you to set out what you agree to do for the client and what you do not agree to do in your engagement agreement. Rule 1.2(c) allows a lawyer to limit the scope of a representation if the limitation is reasonable under the circumstances.
Suppose you agree to represent a client in a worker's compensation claim. You recognize there may be a viable third-party tort claim against a subcontractor, but that is not something you want to handle. You had better limit the scope of your representation in your engagement letter to the worker's compensation claim only. Instruct the client that he needs to retain other counsel to pursue the third-party tort claim.
If the engagement is on a litigation matter, does the scope of the engagement include an appeal? If not, make sure you say that in your engagement agreement.
Even an engagement to do a real estate closing would benefit from a written engagement agreement. Suppose you recommend to the buyer that he get a survey, but he declines. Put that in the engagement agreement or obtain a survey waiver. If later it is determined that there is an easement where he wants to build his dream vacation home, you have a good defense when the client asks you why you did not get a survey.
Describe the Scope of Engagement: Who is Your Client?
Drafting the engagement agreement is an excellent opportunity to clarify in your mind who your client is going to be. Suppose, for example, the father of a young woman brings his daughter to your office and asks you to represent his daughter in her domestic dispute with her husband. He says he will pay your fee. It would be wise to put in your engagement agreement that the client consents to her father paying your bill; the father is not your client; his paying your bill will not interfere with your independence of professional judgment on behalf of the client or with the attorney-client relationship; and finally, that information relating to the representation of the client is confidential under Rule 1.6 and may be privileged as well.
When an organization retains a lawyer, the lawyer must necessarily deal with the organization's directors, officers, or other constituents. Nevertheless, the lawyer's client is the organization and not the organization's constituents. It is vitally important to include this in the engagement agreement and make sure the constituents understand. Otherwise, you run the risk of creating a conflict of interest for yourself.
A lawyer representing an estate represents the personal representative in their official capacity and the estate as an entity. Although the heirs are interested parties, they are not clients of the lawyer. You must define who you do and do not represent in the engagement agreement and in what capacity you represent them.
Describe the Billing Procedures and Fees
Nothing generates disputes between lawyers and clients more than disputes over fees. Describe the billing procedure, including the frequency, detail, and format of the bill. Best practices indicate monthly billing results in happier clients. Notify the client of the right to withdraw if fees are not timely paid. Estimate the fees and costs involved in the agreement, such as filing fees and copying expenses. Knowing what charges to expect will help the client understand the cost of the case. A client blindsided by a higher than expected overall cost of the representation will lose faith in their attorney.
Include in the billing description any additional persons for whom the client may expect to be charged costs, e.g., expert witnesses and consultants. Also, inform the client of all personnel who will assist on their case and the fees associated with each. The client will appreciate knowing that work completed by an associate or paralegal ultimately reduces fees.
Do Not Use the Words "Non-refundable Fee" in Your Engagement Agreement
There is no such thing as a non-refundable fee in North Carolina. Every fee, even a flat fee, is potentially refundable is found to be clearly excessive. Hourly fees, too, are subject to refund if clearly excessive.
2008 FEO 10 sets forth the ethical requirements for the different types of fees and provides model fee provisions. Keep this ethics opinion handy when you are drafting a new engagement agreement.
Describe Office Procedures for Communication with the Client
Use the engagement agreement to establish office procedures for returning phone calls and responding to emails. Find out how the client prefers to be contacted and be sure they understand the confidentiality issues related to each method of contact. For example:
Methods of Communication. Communication via facsimile, computer, or cellular phone is not as secure from inadvertent disclosure to others as other communication forms. You acknowledge that, by furnishing us with an email address, cell phone number, or fax number, you accept the inherent risk that the communication's confidential nature may be at risk. Despite the risk, you authorize us to communicate with you using this mode of communication.
With the prevalence of social media, email, and cell phones, consider including in your engagement letter warnings against an unintentional waiver of the attorney-client privilege. Your client will likely not know what the attorney-client privilege is or how it can be waived. For example:
Privileged Information. As a general rule, the advice and communications between you and us are confidential and covered by the attorney-client privilege. Neither you nor we can be compelled to disclose those communications. Do not discuss our confidential communications with others. Doing so may result in a waiver of the attorney-client privilege.
Consider addressing topics such as the safe and responsible way to use email and smartphones, such as not using employer-owned devices to communicate with the lawyer. Also, inform the client of procedures when you are out of the office. Again, knowing in advance what to expect helps prevent the client from feeling neglected or abandoned if you aren't immediately available.
Consider Addressing Major Obstacles to Success
I have not seen this done, but I think it could be helpful in certain circumstances. Suppose the client retains you to represent them in a personal injury case arising out of a slip-and-fall accident. You recognize there is a significant contributory negligence issue in the case. Why not address that issue briefly in the engagement agreement? Two years down the road, after the jury renders a verdict against your client based on contributory negligence, the client will not remember the conversation you had with them about the issue.
Avoid Superlatives and Make No Guarantees
If you use superlatives like, "our firm will provide the highest quality representation," or "we will always be professionally responsive to your situation," you may subject yourself to a standard of care higher than that required by law. Probably the most you should say is, "the attorneys handling your matter will use their best efforts on your behalf."
Reiterate in the engagement agreement that you cannot guarantee the client any specific outcome in their case. Consider this language:
Please understand that we cannot make and have not made any guarantees regarding the outcome of this matter. Any discussions we have with you in this regard reflect our best professional evaluations only and are limited by our knowledge at the time.
As you and I have discussed, the outcome of legal matters is inherently uncertain, and I have not guaranteed, and cannot guarantee, a favorable result.
Set Out the Grounds for Withdrawal or Other Consequences for Breach of the Engagement Agreement
Inform the client of their right to discharge you and the method for doing so. For the lawyer, Rule 1.16 outlines the circumstances under which the lawyer must and may withdraw. You may want to track the language of the rule in your engagement agreement.
Review with the Client and Have the Client Sign the Engagement Agreement
Review the engagement agreement thoroughly with your client. Answer any questions they may have about wording that is unfamiliar to them. Ensuring the client understands the importance of the engagement agreement will serve you well as the representation unfolds. Allow the agreement to be the client's reference tool regarding how they can expect to be treated by the firm. If they have it in writing from day one, they will typically be happy with the service you provide.
Include in the engagement agreement verbiage demonstrating that the client has read the agreement and has had an opportunity to discuss any questions before signing the contract. Such language may refute the client's claim later that they did not understand that part about how you calculated fees. For example:
Acceptance. Under the words "Agreed to and Accepted," your signature below signifies that you have read, asked any questions you may have, and have had sufficient time to consider the terms of this contract and your agreement to them.
A good engagement agreement is the first line of defense for a lawyer facing a bar grievance or malpractice claim. It also helps avoid simple misunderstandings that may arise between the lawyer and the client. When a misunderstanding or dispute devolves into a "he said, she said" situation, the lawyer will likely come out the loser. Protect yourself and your client with a strong engagement agreement tailored to the specifics of your representation.