Legal Ethics Questions

A recent rerun of The Practice made me wonder about some questions of legal ethics.

The case involved a couple who engaged a small law firm, on a contingency basis, to sue a large company. They won a judgement of $175 million, and the company offered to settle for $2.5 million. The client said, “No, we won a judgement of $175 M. Why should we settle for only $2.5 M?” The lawyers explained that the company could tie up the case in appeal for years (which I think is a gross failure of our legal system – Justice delayed is Justice denied – but that’s another question), and they might never see any money. The client said, “We don’t really need the money, and I want to punish them.” (The suit was about the death of their son.)

At this point, the head of the law firm said that they were entitled to their contingency fee, and threatened to sue the client for their share of the $2.5 M if they didn’t accept the settlement. His colleagues told him that was unethical, and he could be disbarred. Eventually the client accepted a settlement, so that ended it, but left me with some questions:

  1. Was that actually unethical?

  2. Having accepted a case on a contingency basis, is a law firm obligated to follow through with it, without any fees, for as long as the client and the opponent decide to carry it through the courts?

  3. Aside from their fees, what about expenses that may be required to carry on the case, such as witness fees, court fees, travel expenses, etc.? Does the law firm just have to eat those until the case is finally settled?

  4. If the firm is allowed to withdraw, and does so, and the client cannot obtain other representation, and therefore loses an appeal, does the client have any recourse?

  5. If the firm decides to cut its losses and withdraw from the case, and the client obtains another lawyer to carry through the appeals, and eventually wins some settlement, does the original firm have a claim for their contingency fee for the work they did? If so, how much? How much does the new firm get?

Yes, it was unethical. When a lawyer takes a case on contingency, it is typically the case that, in practical terms, the lawyer is in charge. But ultimately the client is the client; it is his interests that require vindication, it is his decision as to how to pursue them. At any time the client has the power to disregard his attorney’s advice, and the attorney must accede to the client’s wishes as they pertain to the case. (The one major exception is if the client wants to commit perjury, but that does not appear to be a concern in your hypothetical.)

If the lawyer no longer wishes to participate in the case, he may attempt to withdraw. Although a lawyer may not withdraw when it would unduly prejudice his client, this does not appear to be such a case, as there is typically plenty of time between verdict an appeal for a new lawyer to get up to speed, and it would certainly do an injustice to the attorney to require him to pay significant and interminable costs for a suit he opposes. (Probably the original lawyer would be required to prepare the appeal and be available for other post-verdict motions, which are often time-sensitive.) If the client really cannot find other representation then a problem might arise. Exactly what is to be done in such situations is a fine enough question that it is probably governed by the state ethics rules, which will vary from jurisdiction to jurisdiction.

As to the matter of splitting the fee between law firms, state ethics rules typically have detailed provisions discussing those issues as well.

One other point of note; in general, threatening to sue your client for a fee right out of the gate without having negotiations about it or trying to work out a payment plan is probably unethical as well. While lawyers are certainly not prohibited from access to the courts to collect professional debts, we do have an ethical obligation to attempt to settle the dispute through other means whenever possible.

–Cliffy, Esq.

P.S. I’m not licensed in your jurisdiction, and as I have never taken a contingency fee in my life, I should certainly not be considered an expert in this field. If you are motivated by anything more than idle curiosity, you should contact an attorney, licensed in your jurisdiction, expert in this substantive area of the law, and fully conversant with the facts. You are not my client. I am not your lawyer.

Richard, I don’t watch The Practice, so I am relying only on your description and apologize in advance if my answer misses some nuance from the show that I was unaware of. If so, hopefully another lawyer who did see the episode can correct me.

Each state’s supreme court prescribes the ethical rules for practicing law in its jurisdiction, so the rules vary from state to state, although not by much. Practically every state (maybe literally every state–I am not certain, although I don’t know of an exception) has adopted, usually with minor variations, either the Model Code of Professional Responsibility or the Model Rules of Professional Conduct, which are model ethical codes proposed by the American Bar Association. (The Model Code was the original ethical code, proposed about a century ago, which almost every jurisdiction adopted. The Model Rules are a newer version, developed about three decades ago, with which many jurisdictions have replaced the Model Code. But the Model Code and Model Rules are not significantly inconsistent: the Model Rules are in many ways a modernized, more nuanced restatement of the principles that the Model Code embodied.) The Practice is set in Massachusetts, which follows the Model Rules, so I will base these answers on the Massachusetts Rules of Professional Conduct. (Your state, Ohio, follows the Model Code, so I will base any references to the Code on the Ohio Code of Professional Responsibility.)

Yes: “A lawyer shall abide by a client’s decision whether to accept an offer of settlement of a matter.” Rule 1.2(a). Likewise, under the Code: “The professional judgment of a lawyer should be exercised, within the bounds of the law, solely for the benefit of his client and free of compromising influences and loyalties. Neither his personal interests, the interests of other clients, nor the desires of third persons should be permitted to dilute his loyalty to his client.” EC 5-1.

Pretty much. Generally, “a lawyer may withdraw from representing a client if withdrawal can be accomplished without material adverse effect on the interests of the client.” Rule 1.16(b). A withdrawal from a contingent-fee case can occur if, for example, the client or the withdrawing lawyer has lined up another lawyer who can simply step in and effectively represent the client. But a lawyer cannot withdraw if doing so will leave the client hanging, stuck with a sour case and little hope of finding a new lawyer, in which case the original lawyer must follow the case through to conclusion. There are certain cases where a lawyer must withdraw from a representation, see Rule 1.16(a); some cases where a lawyer may withdraw, for example where

Rule 1.16(b), and other cases where a lawyer cannot withdraw or cannot withdraw without the tribunal’s permission, see Rule 1.16©.

The allocation of costs, disbursements, and other expenses is based on the lawyer’s contract with the client and, as with most other contracts, the parties can negotiate whatever terms suit them. The rules simply require that

Rule 1.5©.

Probably not if the lawyer was “allowed to withdraw” with the client’s or the tribunal’s permission, which effectively blesses the withdrawal and immunizes the lawyer from its consequences. But if the lawyer withdrew in violation of the rules, see Rule 16, then the withdrawal may constitute malpractice, for which the client can sue the withdrawing lawyer.

The withdrawing lawyer and the client can negotiate the fee to which the withdrawing lawyer is entitled, either when they enter into their original fee agreement, or as a condition of a negotiated withdrawal in which the client agrees to finding a new lawyer (whose fee would then be subject to the client’s agreement with the withdrawn lawyer). Otherwise, a contingent-fee agreement must specify “the contingency upon which compensation to be paid,” Rule 1.5©(4), so if a lawyer withdraws before that contingency occurs then the lawyer may be entitled to no compensation whatever. A lawyer who withdraws involuntarily–for example, because the client discharges the lawyer, or the rules otherwise require withdrawal, see Rule 1.16(a)–and whose agreement with the client does not cover the circumstances involved is probably entitled to an equitable division (probably in proportion to the time spent on the representation, with some allowance for the value of that time based on the involved lawyers’ experience and expertise) of any fee eventually recovered, but may need to take the client to court in order to enforce that division.

It should be noted that Bobby, on The Practice, routinely walks well outside the boundaries of the ethical rules. If he were a real lawyer, he and most of his associates would have been disbarred long ago, or at least censured severely. However, disciplinary hearings do not make good television.

So, under under Rule 1.16(a) of the Rules of Professional Conduct, could a lawyer withdraw from a case where his client refuses to accept a settlement on the grounds that he finds his client’s claim that “We don’t really need the money” to be “pursuing an objective that the lawyer considers repugnant”.

“You’re walking away from 7 figures!?! I’m shocked and disgusted! It’s repugnant! I won’t have anything to do with a client who has such a low regard for money. Why, you’re scorning the very cornerstone of American jurisprudence!”

A good lawyer should have clauses in the retainer agreement do deal with this sort of stuff.

For what it’s worth, I am a lawyer who does contingency fee cases. All of my retainer agreements provide that my services don’t include pursuit of or response to appeals; defense of counterclaims; or collection actions against third parties.

It might be worth arguing, but my own understanding of that Rule is to prevent a client from forcing a lawyer to, say, close down a church or argue that the client should be permitted to get an abortion (if the lawyer does indeed find such an action repugnant.)

Note however that Rule 1.16(b)(5) as quoted by brian insulates the lawyer from “an unreasonable financial burden”; this seems to me designed to addres something like the situation described in the OP.