June 15, 1989
It is improper at the outset of representation for a lawyer to request a client to sign a stipulation for withdrawal when fees are not paid.
References: MRPC 1.16(b)(4) and (5), 1.16(c); RI-6, RI-10; CI-559, CI-870, CI-930; State Bar of Michigan v. Daggs, 384 Mich 729 (1971).
A lawyer has had several experiences where clients fail to pay attorney fees in a timely manner and the lawyer is unable to withdraw from the representation. The lawyer proposes to have clients sign at the outset of representation a stipulation for withdrawal if fees are not paid according to the agreement. The stipulation would be attached to a proposed order for withdrawal for the presiding judge to sign.
MRPC 1.16(b)(4) and (5) state:
"(b) Except as stated in paragraph (c), a lawyer may withdraw from representing a client if withdrawal can be accomplished without material adverse effect on the interests of the client, or if:
". . .
"(4) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;
"(5) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; . . . ."
Thus it is permissible to seek withdrawal when the lawyer's financial burden is great. Sufficient financial burden may depend on a variety of factors such as (1) the number of lawyers in the lawyer's firm, (2) the amount outstanding on the client's bill, (3) the number of cases the lawyer has, and (4) the time commitment of the lawyer in the present case.
MRPC 1.16(c) states:
"When ordered to do so by a tribunal, a lawyer shall continue representation notwithstanding good cause for terminating the representation."
Thus even if a stipulation were permitted, it should not be construed to interfere with the authority of the tribunal to order representation to continue.
The Committee recognizes that financial disputes may reach such an impasse as to interfere with the lawyer's professional judgment.
To determine whether a stipulation for withdrawal would be proper, we must balance the interests of all those affected, including the lawyer, the client, and the court. There must be more than a client's failure to pay. A decision turns on the facts and circumstances in each particular case. Factors which may be considered are:
- the financial condition of the client when the representation was undertaken, and whether the lawyer knows or should have known of the client's inability to pay;
- the sophistication of the client as a consumer of legal services;
- whether the costs, expense and fees in the matter were predictable and explained fully to the client;
- whether the lawyer offered several different fee arrangements and the client selected the fee calculation or payment option over others offered by the lawyer, with knowledge of the consequences of that selection;
- whether the actual charges remained in the range predicted;
- how long the fee has been outstanding;
- efforts the client has made to submit partial payment;
- efforts by the lawyer to negotiate a more lenient fee payment schedule;
- periodic notice to the client on costs and expenses incurred;
- whether there is a dispute about the fee.
The typical client comes to the lawyer without knowledge of legal proceedings or the length of time until judgment, and without familiarity with normal costs and fees. Although there is no specific ethics rule prohibiting a stipulation, such a proposal is always threatening to the client.
In State Bar of Michigan v. Daggs, 384 Mich 729, 187 NW2d 227 (1971), where a lawyer was suspended for three months after accepting a retainer and failing to perform because the lawyer believed the client owed him more money, the court stated:
"Once a lawyer accepts retainer to represent a client he is obliged to exert his best efforts wholeheartedly to advance the client's legitimate interests with fidelity and diligence until he is relieved of that obligation either by his client or the court. The failure of the client to pay for his services does not relieve a lawyer of his duty to perform them completely and on time, save only when relieved as above."
There are less objectionable means available to the lawyer to preserve financial stability. A fee agreement may provide for an initial retainer or for monthly billings. The lawyer and client may agree to the performance of work in stages for set fees. CI-559, RI-10. Also, a lawyer may at the outset of representation alert a client to the possibility of petitioning the court for withdrawal in the event of the client's failure to abide by the fee agreement, as suggested by MRPC 1.16(b)(4).
In CI-870 we stated that a stipulation of withdrawal at the outset of representation is contrary to the profession's obligation to provide legal services. We affirm that decision.