MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2009-10
Propriety of legal clinic accepting new clients amid the possibility of closing clinic and requirements of disclosure and fee arrangement.
A non-profit legal service provider (Clinic) offers immigration-related services at minimal cost to its clients. As a result of a financial downturn, the Clinic anticipates the potential of ceasing operation. The Clinic has become concerned that in accepting new cases, it would take on representations that would extend past the time that the organization closed its doors. Specifically, the Clinic is concerned that a cease in its operation would force its clients, whose matters have not been completed, to incur unexpected additional costs in retaining new counsel to complete the representation. The Clinic seeks advice as to whether it may continue to accept new clients and whether, and in what form, a disclosure to the client is required. Finally, the Clinic inquires into the requirements of the fee agreement when closure of the Clinic is a distinct possibility during the pendency of representation. These facts have been gathered based on the inquiry sent to the Committee by the Clinic, and this opinion is applied solely to the situation and assumptions as described above.
The Clinic provided segments of a potential retainer agreement aimed at responding to its expressed concern. Per the Maryland Bar Association Committee on Ethics Guideline 1(c), the Committee on Ethics does not approve proposed fee agreements or the text of other law-related documents. As such, this opinion will neither address nor approve or disapprove of the sample retainer agreement presented to the Committee by the Clinic, but will provide guidance with respect to the questions posed.
The first issue is whether the Clinic may accept new clients when there is a possibility that the Clinic may shut its doors during the course of representation and thereby force the client to find new counsel. Under Rule 1.3, Md. Rules of Professional Responsibility, attorneys must act with diligence in representing a client. Part of this diligence includes the general requirement to carry all matters undertaken for a client through to their conclusion, unless the client-lawyer relationship is terminated as provided by the Rules. Rule 1.3, Comment [4]. Indeed, a lawyer “should not accept representation…unless it can be performed…to completion.” Rule 1.16, Comment [1]. However, Rule 1.16(b)(6) allows a lawyer to withdraw from representing a client if continuing the representation “will result in an unreasonable financial burden on the lawyer…” or for other good cause.1
The Clinic has stated, given the economic downturn and/or a potential loss of funding, there is a possibility that the Clinic may have to close in the future. The Clinic has indicated that “this is not necessarily the case for our organization, but we are exploring all possibilities in this economic downturn.” But, in this aspect, the Clinic is no different from all types of attorneys and firms uncertain of their own economic future. To bar any lawyer from taking new clients if they were simply unsure of their financial future would deprive much of the public from access to legal services. This is even more important with respect to organizations such as the Clinic that provide low-cost services for those who arguably need them the most. This stands in contrast to the attorney who accepts a flat fee payment in advance for the entire course of the representation, knowing that his or her representation will end before the client’s matter is concluded. It follows that if an attorney, at the commencement of representation, in good faith intends to act diligently in representing clients until the conclusion of the agreed-upon matters, they may accept new clients. The option for withdrawal in Rule 1.16(b)(6) exists as a way for lawyers to manage their relationships when financial realities come to a head. If continuing the representation causes an unreasonable financial burden for the attorney, the attorney may withdrawal, provided they “take steps to…protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel…and refund any advance payment…that has not been earned or incurred.” Rule 1.16(d), Md. Rules of Professional Conduct; Rule 1.16, Comment [9]. Additionally, there are procedures for limiting the scope of representation, discussed supra, that allow for the Clinic to take on clients despite being unsure of how long it will be able to function. Therefore, the Clinic may continue to take on new clients, despite uncertainty as to the future viability of the organization.
Related to the issue of accepting new clients is the question of what fee agreements are acceptable in the circumstances and whether the Clinic is required to disclose that its ability to represent the client may end in the foreseeable future. This question raises issues related to fees and limitation of the scope of representation.
Rule 1.5, Md. Rules of Professional Responsibility addresses the guidelines and obligations surrounding fees and establishes that fees must be reasonable. Rule 1.5(a).
Rule 1.5(b) states:
The scope of the representation and basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client.
Comment [2] to Rule 1.5 recommends that a written statement containing the nature of services to be provided, the amount of the fee, and any costs for which the client may be responsible during the representation be provided at onset of representation. Comment [4] explains that advance payment by the client for future services is permissible, but that a lawyer is required to return any unearned portion of the payment.
Both the scope of representation and the fees to be charged must be established at the commencement of the representation, and both must be reasonable. See Rule 1.2(c), 1.5(a). It follows that the Clinic may not charge advance payment or fees for services that it knows it will not provide, as such a fee would not be reasonable. Furthermore, if the Clinic has accepted advanced payment, and unexpectedly closes before all such funds have been used or earned, the Clinic must return any unearned portion of the fee to the client. See Rule 1.5, Comment [4]. As made plain by Comment [5] to Rule 1.5:
[A] lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required, unless the situation is adequately explained to the client. Otherwise, the client might have to bargain for further assistance in the midst of proceeding or transaction. However, it is proper to define the extent of services in light of the client’s ability to pay.
Depending on a client’s circumstances, defining specific stages in the potential representation and assigning fees to each stage may be a way to assure that the fee is reasonable and communicated to the client.
Rule 1.5(b) mandates that both the scope of the representation and the fees or expenses that will be charged be communicated to the client. Furthermore, any limitation in the scope of the representation requires the informed consent of the client. See Rule 1.2(c).2 The possibility that the representation will be cut off in the event the Clinic closes its doors is a limitation in the scope of representation, and the Client must provide informed consent to such limitation. Id. Informed consent means that the lawyer must provide information regarding the possible consequences to such limitation. See Rule 1.0(f). Indeed, it is a distinct possibility that if the Clinic closes its doors, a client in need of new counsel will be forced to pay a significantly higher fee than it pays to the Clinic. This disclosure is a detail of the informed consent required for limiting the scope of the representation, and the Clinic must provide such information to any client prior to commencing the representation.
In sum, the Clinic may continue to accept new clients because the rules provide for protection of clients in cases of limitation of representation and withdrawal of representation for financial burden. When accepting new clients, however, the Clinic is required to communicate a reasonable fee agreement and obtain informed consent of the client to a reasonable limitation of the scope of representation. Although the fees charged by the Clinic are minimal, the Clinic may not accept fees it knows it will not earn in the representation, and must return all unearned fees to the client if forced to close its doors. Furthermore, as part of obtaining informed consent to limiting the scope of the representation, the Clinic must inform the client of potential consequences of terminating representation if the Clinic closes, one of which is the possibility of additional fees at a higher rate incurred in retaining a subsequent legal service provider.
The Committee hopes it has addressed your inquiry and thanks you for your interest. Our opinions are available online at www.msba.org.
1 The Committee understands that the Clinic provides representation in civil matters
only and notes that withdrawl in criminal matters gives rise to additional issues and may not
be as simple.
2 Rule 1.2(c) permits a lawyer to limit the scope of the representation, as long it is
reasonable and the client gives informed consent of the limitation. Informed consent
requires the lawyer to communicate and explain the risks of and alternatives to proposed
conduct. Rule 1.0(f).
References: Maryland Bar Association Committee on Ethics Guideline 1(c); Maryland Rules of Professional Responsibility 1.0, 1.2, 1.3, 1.5, 1.16
Assigned to: Patricia M. Weaver
Date Assigned: March 11, 2009
Date Distributed: July 9, 2009