Cutting The Ties That Bind (Part III)

[This post is the third in a series of posts on the issues involved with terminating a relationship with an attorney.]

As noted in previous posts on this subject, the reasons for breaking up with an attorney can be many.  Sometimes it is a breakup within the law firm or the retirement of a key partner that has precipitated the decision to move files to another firm.  Or it could be poor communications or even just bad lawyering.

Often times, though, the reason for the decision to move files to another attorney is money. In fact, it may even be a large disputed bill that precipitated the decision to transfer a particular file as well as other files the lawyer has to another lawyer.

Unfortunately, attorneys may have the upper hand (at least for the moment) on this issue on the issue of payment of disputed legal fees before files can be transferred. This is because many states allow attorneys to declare a “retaining” or “charging” lien on all client property they have in their possession to secure payment of their legal bills.

As noted in a prior post, the client’s file is considered as the client’s property – to the extent that the client has paid for the property – and attorneys have an ethical obligation to return all client property upon termination of the relationship.  See RPC 1.16(d).  However, there is a quirk in the law here that tends to favor attorneys and trump the ethics of the profession.  This quirk is that attorneys may assert a “lien” on all of the client’s property in the possession of the attorney until all fees are paid.  Thus it is that even though a client many have paid for 95% of what is in the file, the attorney may legally retain all the file until all fees are paid although some courts do provide for some limited exceptions to this.

Of course, the client can always choose to litigate the disputed fees.  But that takes time and time means more money.   Thus, most clients usually wind up submitting to this form of legalized extortion in order to get their files into the hands of another lawyer.

However, there is a saving grace for clients.  The saving grace here for clients is that agreeing to pay disputed fees does not affect the right to subsequently challenge the lawyer’s fees at later date.  See ABA Annotated Model Rules of Prof. Conduct (7th ed. 2011), Comments to RPC 1.5 (Fees) at p. 74, Review Always Available (“No matter what the client has agreed to. . .”).  Thus, where time is a factor, it might be more prudent to pay the disputed legal fees under a reservation of rights and then pursue the attorney for the disputed charges at a later time.

Breaking-up is never an easy thing to do whether it involves a personal or business relationship.  And just as it is a good idea for married couples to have a pre-nup agreement, it is also a good idea to have “pre-nup” language in your assignment letter with counsel that addresses and clarifies what specifically is to be done (and who pays for what costs) if assigned files are transferred to another lawyer.  The assignment letter should also most importantly contain language that requires the attorneys to agree to not assert a “lien” on the file if the file is later transferred to another attorney.  Of course, litigation and billing guidelines should also address this point.  Unfortunately, no guidelines that I have ever read address this point.

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