After landing a new client, most attorneys are eager to start working. Our initial focus is often on wanting to impress the client or getting ahead of any time-sensitive issues. We may not be as excited about drafting an engagement agreement and, as a result, are tempted to take a prior engagement letter, perhaps one that’s been used for many years, change the client’s name, send for their signature, and never look at it again.
Much like other work product that will be used in the matter, we should ensure the engagement agreement is tailored to the client. This article highlights recent appellate decisions regarding engagement agreements and hopefully serves as a reminder to review your engagement agreement carefully before starting new work.1
PUT IT IN WRITING
The best way to memorialize intentions, like most contractual relationships, is with a written document. If possible, and certainly if the rules of professional conduct or your insurer require it, create a proposed written contract for the potential client’s review and signature.
“The cardinal rule in the interpretation of contracts is to ascertain the intention of the parties. To this rule all others are subordinate.”2 As such, if the language of the engagement agreement is unambiguous, courts will likely construe and enforce the contract as written.
We have all likely experienced the scope of our representation morphing (particularly if you work with the same client over time.) If a current client asks you to perform additional services, it is important to document the new matter. If a client asks about additional services and you will not be involved, document that as well.3 Also, check to see if the engagement agreement identifies or suggests services that you do not intend to perform.4
IDENTIFY THE CLIENT
If the client is an individual, then it may not be difficult to identify the client. But if a corporation is the client, the Michigan Court of Appeals has held the client relationship does not extend to shareholders.5 An engagement agreement should make this clear.
DEFINE THE SCOPE OF SERVICES
Attorneys and clients may be most interested in fee terms, but equally important is the scope of services. In certain instances, identifying the scope of the work may seem simple, especially when a lawsuit is involved. But even when services relate to a pending lawsuit, attorneys should be cautious. In an unpublished opinion, the Michigan Court of Appeals reviewed a case where the plaintiff retained the defendants to represent her “with respect to a divorce/motion to dismiss matter.”6 The plaintiff asserted legal malpractice, breach of contract, and other claims, alleging she requested a motion to dismiss/change venue which the defendants failed to file. The trial court granted the defendants’ motion for summary disposition because the two-year limitations period barred her legal malpractice claim.
On appeal, the Michigan Court of Appeals reversed, reasoning that the plaintiff’s allegations established a special agreement distinct from the attorney’s duty to represent plaintiff competently. As such, the court held the six-year limitations period for breach of contract actions applied. The Michigan Supreme Court denied an application for leave to appeal.
Another way to define what is included in the scope of the work is to identify what is not included. For example, did you promise a specific course of action? Did you promise to provide tax advice? Did you agree to perform appellate work? If not, consider identifying what you did not agree to do in addition to spelling out what you agreed to do. Attorneys could also suggest what the client should do if it wants excluded services such as going to another attorney or indicating that an additional or amended agreement will be required. The more detail included in the engagement agreement, the easier it will be for the client (and any reviewing court) to understand the parties’ intentions.
SUGGEST INDEPENDENT COUNSEL REVIEW IF AN ARBITRATION PROVISION IS INCLUDED
More than 20 years ago, the Michigan Court of Appeals addressed the validity of an arbitration provision in an attorney-client agreement, concluding that the provision was fully enforceable.7 In 2020, the Michigan Court of Appeals revisited the issue, opining (once again) that the arbitration provision was enforceable. But this time, the court focused on whether a client is required to have independent counsel review the engagement agreement containing the arbitration provision before signing. Ultimately, the court observed that “nothing in the plain language of MRPC 1.8(h)(1), or any of the other rules of professional conduct, indicates that an attorney needs to specifically advise a client that a consultation with an independent attorney regarding a retainer agreement should or must entail a discussion of an arbitration provision contained in the agreement.”8
The pros and cons of asking a client to agree to an arbitration provision are beyond the scope of this article. But if you include an arbitration provision in your proposed engagement agreement, consider requiring potential clients to consult with an independent attorney. The Watts decision did not find or create any such rule, but in the Tinsley case, that is factually what occurred (the client consulted with independent counsel before signing the engagement agreement.) Moreover, following the Tinsley case in 2020, the Michigan Supreme Court proposed an amendment to MRPC 1.8 that, if adopted, would prohibit attorneys from making “an agreement that includes a lawyer-client arbitration provision unless the client is independently represented in reviewing the provision.”9 Thus, if you elect to include an arbitration provision in an engagement agreement, consider requiring potential clients to engage independent counsel before signing.
REVIEW THE ENGAGEMENT AGREEMENT
A party’s failure to read or understand an engagement agreement may not be a defense for enforcing the contract.10 Nonetheless, consider instructing clients to review proposed agreements and ask questions before signing. Engagement agreements are usually the first document that clients review, and they may appreciate a candid discussion about any concerns they may have. Attorneys should also consider asking their firm’s general counsel or insurance carrier to review their engagement agreement.
The next time you bring in new work, review your engagement agreement to confirm it correctly identifies the client and the work to be performed. Specifically delineate what is included and perhaps what is not included in your representation. Take the time to ensure the engagement agreement accurately reflects your and your client’s intentions. That way, you will reduce the likelihood of future misunderstandings and increase the likelihood of an enjoyable attorney-client relationship.
Please note that this article is not an exhaustive summary of issues to consider when drafting an engagement agreement. For additional considerations and sample engagement agreements, visit the State Bar of Michigan Practice Management Resource Center.11