May 4, 1983
A contract provision that a client cannot discharge a lawyer during the course of representation until all legal fees and costs owing the firm are paid is unethical.
A lawyer's contractual right to sue a client for attorney's fees earned and for reimbursement of costs advanced is a question of law for the courts to decide.
A lawyer may withdraw from employment upon the client's deliberate disregard of an agreement to pay for fees or expenses, provided that the attorney first give the client reasonable notice and ample time to employ substitute counsel; that the attorney deliver to the client all papers and property to which the client is entitled; that the unused portion of fees paid in advance and unearned are refunded to the client; and if permission for withdrawal is required by the rules of a tribunal, it first be obtained.
Attorney withdrawal under circumstances where the client lacks financial ability to meet the contractual requirements of an agreement for payment of fees and costs is not always ethically justifiable in the absence of other conduct which makes it unreasonably difficult for the attorney to effectively conclude the case.
References: DR 2-110; CI-926; Kysor Industrial Corp. v. DM Liquidating Co. 11 Mich. App 438 (1968); Dual v. Sill Mortgages, Inc., 37 Mich App 708 (1972); and Ambrose v. Detroit Edison Co., 64 Mich App 484 (1975).
An inquiry recognizes that an agreement to deliver legal services on behalf of a client may not be completed either upon the initiative of the attorney, the client or for reasons beyond the control of both. Paragraph 1 and 7 of the agreement relate to attorney withdrawal and paragraph 8 addresses the issue of termination by the client.
Some preliminary observations will provide you with a better understanding of the Committee's conclusions. An attorney's right to compensation depends upon the existence of an express or implied contract of employment, since in the absence of a consensual arrangement an attorney is generally not entitled to a fee. The amount of the fee for professional services is left to the parties, subject to specific statutory provisions and the regulatory supervision of the Michigan Supreme Court. Questions of law are beyond the scope of the Committee's jurisdiction. Recognizing that frequently the areas of law and ethics overlap, this opinion will be directed toward the ethical propriety of the proposed agreement.
Even under circumstances where DR 2-110 permits attorney withdrawal, DR 2-110(A) requires that reasonable notice be given to the client, allowing ample time to employ substitute counsel; that the attorney deliver to the client all papers and property to which the client is entitled; that the unused portion of fees paid in advance and unearned be refunded to the client; and that if the particular tribunal requires leave of court (the general rule), permission must first be obtained.
Paragraph 8 of the proposed agreement permits the client to terminate the relationship upon five days written notice "received by the law firm" (no mention of the law firm's notice of termination being received by the client is specified in the event of attorney withdrawal). The paragraph then goes on to provide that the termination will not become effective until the client has paid all legal fees and costs owing under the Retainer Agreement, including the possibility of a collection action to enforce payment. The Code does not address the circumstances upon which the client may terminate the relationship. However, because of the nature of the attorney-client relationship being founded upon contractual principles of agency, and the attorney's fiduciary obligations of loyalty and diligence, it is generally recognized that a client is ethically free to discharge an attorney for any cause or no cause at all, if the client no longer feels comfortable with the particular attorney.
The provision that the client's determination to discharge the firm is ineffective until the client had paid all legal fees and costs owing is not ethical. The client's power to discharge the firm from any further representation is absolute.
Termination for no cause may entitle the attorney to an action for damage which is a question of law. In the event a client discharges a lawyer with cause, or the lawyer withdraws without justification, the lawyer may forfeit any rights to compensation. Here again, the issue is legal, rather than ethical. Thus, it is apparent that the legal consequences of paragraph 8 are primarily legal and not ethical.
By stating in paragraph 8 that "prior to the termination becoming effective, Client(s) must have paid all legal fees and costs due under the General Retainer Agreement" also suggests the possibility that the firm may impose a retaining lien on all documents, money or other property of the client in the possession of the attorney pending payment of unpaid fees and costs. Michigan does recognize the common law right of a lawyer to retain possession of client documents, money or other property of the client coming into the lawyer's hands during the course of professional employment until a sum due for professional services is paid. See Kysor Industrial Corp v. DM Liquidating Co 11 Mich. App 438 (1968); Dual v. Sill Mortgages Inc, 37 Mich App 708 (1972); and Ambrose v. Detroit Edison Co, 64 Mich App 484 (1975). This right to assert the retaining lien in a given situation is a question of law to be decided by the courts. There are, however, ethical considerations.
Assuming that the law firm has a legal right to assert the attorney's lien, care should be taken to assure that imposition of the lien would not adversely affect interests of the client. ABA informal opinion 1461 suggests several factors that the lawyer should consider in making this evaluation.
"The lawyer should take into account . . . whether imposition of the retaining lien would prejudice important rights or interests of a client or other parties, whether failure to impose the lien would result in fraud or gross imposition by the client, and whether there are less stringent means by which the matter can be resolved, or by which the amount owing can be secured."
When a lawyer is discharged and the client employs a successor lawyer, if the first lawyer's fee and costs advanced remain unpaid, the lawyer need not surrender the client's papers to the new lawyer, unless their retention would cause prejudice to the client's case, or substantial injustice to others. In such cases, it would be ethically appropriate for the law firm to retain property (including the client's file) or funds sufficient to secure payment of earned legal fees or require the client to substitute other collateral to secure payment. If however, the law firm withdraws from representation without cause, it would not be ethical to retain client properties including the original file. The Committee opined in CI-926 that the original file belongs to the client.