Ethics Docket No. 1995-17

MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 1995-17

Fees: retainer agreements – propriety of inclusion of limitation of liability provision

In your recent letter you have requested that the Committee advise you as to whether it is ethical for you to include certain language in your client retainer agreement. The proposal language would state as follows:

""Notwithstanding the provisions of any applicable statute, the sole and exclusive remedy available to Client is damages in an amount not to exceed the fees actually paid by the Client for services, and all other remedies, statutory or otherwise, are hereby expressly waived by Client.""

Attached to your inquiry was a synopsis of the decision of the Court of Special Appeals of Maryland in Baker v. Roy Haas Associates, 97 Md. App. 371, 629 A.2d 1317 (1993). In that case, the Court of Special Appeals considered the enforceability of a limitation of liability provision contained in an agreement used by a home inspection company. It held that the provision was valid and enforceable in limiting the inspection company's liability to the amount of fees paid by a purchaser for inspection. However, the court recognized that it was against public policy to permit exculpatory agreements as to certain transactions involving the public interest.

It is not the policy of the Committee to approve proposed language to retainer agreements. However, the Committee will opine as to whether a provision in a retainer agreement would violate the Maryland Rules of Professional Conduct. As a result, the Committee addresses the language which you propose to include in your agreement.

The Committee believes that the answer to your inquiry is governed by Rule 1.8(h) of the Rules which provides as follows:

""A lawyer shall not make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement, or settle a claim for such liability with an un-represented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith.""

The dichotomy in Rule 1.8(h) between the situation a lawyer is prospectively attempting to limit liability to a client versus the situation where a lawyer is settling a claim for such liability with an un-represented client or former client has been discussed in Ethics Docket 90-12.

The key issue in your inquiry is whether an attorney may limit liability by utilizing a limitation clause in a retainer agreement. In the Committee's view, the effect of the language which you propose in your retainer agreement would be to limit prospectively an attorney's liability to a client for malpractice. Accordingly, under Rule 1.8(h) you may not include such language in your retainer agreement ""unless permitted by law."" The Committee expresses no opinion on the legal question as to whether retainer agreements between attorneys and clients fall within the policy of precluding exculpatory agreements involving the public interest as noted in the Baker decision.

Further, under Rule 1.8(h) if you were to include this language in your retainer agreement you would be under a duty to advise your prospective client to seek independent counsel, and your prospective client would have to be represented by independent counsel in connection with executing your retainer agreement. If the prospective client declined to seek independent counsel, then you would be prohibited from entering into a written agreement containing the clause which you have proposed. In that case, obviously, you would simply have to decide whether to represent the client absent such a limitation in the retainer.