Summary: When lawyers change firms and clients
move with them, new engagement letters should be executed with the
new firms as to hourly matters, and must be executed as to
contingent matters, even when no material terms change. A lawyer
bears the burden of justifying as fair and reasonable to the client
any material change in the terms of the engagement that occurs
after a representation commences. As to clients who want the old
firm to continue to represent them, that firm's actions must comply
with ethical and, where applicable, court rules.
Facts: A lawyer writes that she has recently
joined a new firm and that some of her clients have elected to
leave the old firm with her. They include both hourly and
contingent fee clients. All of them had signed fee agreements with
the old firm. The lawyer asks whether these agreements will suffice
or whether she should ask the clients to sign new agreements.
Discussion: Mass. R. Prof. C 1.5(b) requires as
to hourly clients that within a reasonable time after a
representation commences the client be informed in writing of the
scope of the representation and the basis or rate of the fee and
expenses to be charged to the client. The lawyer and her old firm
followed the preferable practice of signing agreements with clients
rather than merely giving them written notice. It seems reasonable
to us that when the entity providing legal services changes, a new
agreement be entered in the name of the new entity, even if the
scope of the engagement and the arrangement for fees and expenses
are unchanged. We believe that, when a lawyer moves laterally to a
new firm, the common practice is to sign new engagement letters
between the new firm and the incoming lawyer's clients. The lawyer
has an obligation to communicate with the client about the fee
arrangement with the new firm and obtain the client's informed
consent to that arrangement. See Mass.R.Prof.C. 1.4(a)(1) and
1.4(b). The better practice is to document the client's consent
with a new fee agreement.
In the case of contingent fee clients, a contingent fee
agreement meeting the requirements of Rule 1.5(c), not just written
notice, is mandated. If a new entity will provide the legal
services, a new contingent fee agreement must be executed. Note
that Rule 1.5(c)(2) requires that contingent fee agreements state
"the name and address of the lawyer or lawyers to be retained
…."
If the old firm is entitled to any portion of an eventual
recovery on a contingent fee matter, its share should be worked out
between the lawyer and that firm in a manner that will not affect
the share to which the client is entitled or delay the client's
receipt of that share. Although not mandated by the Rule, such an
arrangement would be in accord with Paragraph 7 in Contingent Fee
Agreement Form A attached to Rule 1.5, which states:
(7) [USE IF LAWYER IS SUCCESSOR COUNSEL] The lawyer is
responsible for payment of former counsel's reasonable attorney's
fees and expenses and the cost of resolving any dispute between the
client and prior counsel over fees or expenses.
Such an arrangement would also be in accord with the Supreme
Judicial Court's instruction that, "A client should never be made
to pay twice." Malonis v. Harrington, 442 Mass. 692, 702
(2004).
While Paragraph 7 in Contingent Fee Agreement Form B provides an
alternative under which the client is responsible for payment of
former counsel's reasonable fees and expenses, this alternative
provision does not seem appropriate where the new agreement is
required because the lawyer has decided to change firms.
As to the hourly clients, we assume that work performed before
the lawyer changed firms will be billed by the old firm, and work
performed thereafter by the new firm. See Eisenstein v.
Conlin, 444 Mass. 258 (2005) (when lawyer changes firms, old
firm cannot claim a percentage of the hourly billings of the lawyer
at the new firm).
Unless the lawyer's new firm will continue to bill the hourly
clients at the same hourly rate as before and the basic financial
terms of the contingent fee agreements will remain the same as
before, the lawyer will bear the burden of proving that the changes
under the circumstances were fair and reasonable to each client.
See Restatement
of the Law Governing Lawyers, § 18(1)(a), comment e (2000),
quoted favorably in Saggese v. Kelley, 445
Mass. 434, 443 (2005).
Factors that bear on whether an increased fee at the new firm
would be fair and reasonable to a client include the amount of the
increase and whether the client had a viable option of continuing
to be represented by the old firm. Although not directly applicable
here, Mass. R. Prof. C. 1.17, dealing with Sale of Law Practice,
may assist in determining what is fair and reasonable to a client.
Rule 1.17(d) provides:
The fees charged clients shall not be increased by reason of the
sale. The purchaser may, however, refuse to include a particular
representation in the purchase unless the client consents to pay
the purchaser fees at a rate not exceeding the fees charged by the
purchaser for rendering substantially similar services prior to the
initiation of the purchase negotiations.
Some of the departing lawyer's clients want to continue to be
represented by the old firm. Under the present facts, the old firm,
rather than the lawyer individually, signed the fee agreements with
clients. The Supreme Judicial Court addressed just this situation
in In re Kiley,
459 Mass. 645, 649, 652 (2011):
Where, as here, the client enters into a representation
agreement with a law firm rather than a sole practitioner, the law
firm may not terminate the agreement simply because the attorney
who had been handling the case has died, left the practice of law,
or moved to a different firm. While the departure of the
responsible attorney may cause the client to leave the firm, it may
not cause the firm to leave the client if withdrawal will have a
material adverse effect on the client's interests and none of the
circumstances requiring or permitting withdrawal is present. See
Mass. R. Prof. C. 1.16.
. . . .
When an attorney who is a partner, shareholder, or employee of a
law firm enters an appearance in a civil case, the appearance binds
both the individual attorney and that law firm to appear on behalf
of the client … Where an attorney leaves a law firm and moves to
withdraw, and where successor counsel from another law firm does
not file an appearance, a judge is entitled to expect that another
attorney from the law firm will enter an appearance and continue to
represent the client. In such circumstances, unless specified in
the order, the allowance by a judge of a departing attorney's
motion to withdraw does not also permit the law firm to
withdraw.
This advice is that of a committee without official
government status.
This opinion was approved for publication by the
Massachusetts Bar Association's House of Delegates on Jan. 26,
2017.