Ethically Terminating an Attorney-Client Relationship

The general rule is that a firm is required to withdraw from representation in three situations: If continuing the representation will result in a violation of the law or rules, if the attorney is unable to represent the client due to a physical or mental if impairment, or if the client fires the attorney/firm. See Model Rule 1.16(a). Some jurisdictions add a fourth ground for mandatory withdrawal ' the client is bringing the lawsuit merely to harass or injure another person. See, e.g., N.Y. Rules of Prof'l Conduct Rule 1.16(a)(4); Cal. Rules of Prof'l Conduct Rule 3-700(B).

Mandatory withdrawal also is required when conflicts arise during the course of concurrent representation and the conflict either cannot be waived or one party will not agree to waive the conflict. See Model Rule 1.16(a)(1); see also N.Y.C. Bar Ass'n. Comm. on Prof'l & Judicial Ethics, Formal Op. 2005-05, 2005 WL 6631005 (2005) (“when two clients will not consent to a conflict of interest, and the conflict requires consent, the law firm must withdraw from representation of at least one of the clients.”). Importantly, an attorney generally may not drop an existing client in the midst of an active representation, like a “hot potato,” so that they may take on a new representation. See, e.g., Restatement (Third) of the Law Governing Lawyers (2000) ' 132, Reporter's notes to cmt. c; In re Rite Aid Corp. Sec. Litig., 139 F. Supp. 2d 649, 658 n.15 (E.D. Pa. 2001); Merck Eprova AG v. Prothera, Inc., 670 F.Supp.2d 201 (S.D.N.Y. 2009); N.Y.C. Op. 2005-02 (2005).

More often, the question firms face is not “must we fire the client,” but “may we fire the client.” The Model Rules recognize seven grounds for permissive withdrawal:

(1) withdrawal can be accomplished without material adverse effect on the interests of the client; (2) the client persists in a course of action involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent; (3) the client has used the lawyer's services to perpetrate a crime or fraud; (4) the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement; (5) 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; (6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or (7) other good cause for withdrawal exists.

Model Rule 1.16(b).

Other jurisdictions recognize additional grounds, such as the client fails to cooperate in the representation, the attorney is unable to work with co-counsel, and the attorney's own mental or physical condition makes it difficult to carry out the representation. See, e.g., N.Y. Rules of Prof'l Conduct Rule 1.16(c); Cal. Rules of Prof'l Conduct Rule 3-700(C).

Engagement letters are an ideal vehicle for outlining the circumstances under which a firm may withdraw as counsel. In many jurisdictions, an engagement letter may set forth other grounds for terminating the client-attorney relationship, as long as they are consistent with the grounds set forth in Rule 1.16. See, e.g., NYSBA Formal Opinion 719 (1999). For instance, an engagement letter may specify that a firm may withdraw from representation if, after investigation or consultation with experts, the firm is convinced that the defendant is not liable. See NY State Bar Ass'n. Comm. on Prof'l Ethics, Formal Op. (“NYSBA Formal Opinion”) 440 (1976).

The existence of an engagement letter specifying certain grounds for terminating the client-attorney relationship does not relieve a firm of its obligation to seek the court's permission, if necessary. See NYSBA Formal Opinion 440. Nor may an engagement letter “mislead the client with regard to the attorney's obligations, including the obligation to continue as counsel in the absence of a permissible ground for withdrawing from the representation.” NYSBA Formal Opinion 719.

Does the Firm Have Additional Responsibilities When Withdrawing from a Client Matter?

After a firm withdraws from representing a client, there often are loose ends to tie up ' the file must be produced to the client and outstanding fees must be resolved. When withdrawing as counsel, the ethics rules are clear that attorneys must minimize prejudice to the client by, among other things, providing the client with a copy of her file when necessary. See Model Rule 1.16(d) (“a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred ' “).

What is not as clear is what constitutes the “client file.” Some jurisdictions, such as New York, define “client file” broadly to include things like attorney work product and internal e-mails. See, e.g., Sage Realty Corp. v. Proskauer Rose Goetz & Mendelsohn LLP, 91 N.Y.2d 30, 34 (1997) (noting that a former client's right to the file includes not only final versions of documents or correspondence, but also legal memoranda, drafts and notes, etc., although excluding documents intended solely for internal law office review and use); N.Y.C. Bar Ass'n Op. 2008-1 (interpreting Sage Realty to require the production of electronically stored information as part of the client file). Other jurisdictions take a more restrictive view of what constitutes the “client file.” See, e.g., State Bar of S.D., Ethics Op. 96-7 (Oct. 2, 1996) (stating that a “lawyer need not deliver his/her internal notes and memos generated primarily for his/her own purposes in working on the client's problem,” but noting that “a lawyer should deliver all other material which may be deemed useful to the client in benefitting fully from the services he/she purchased from [the] firm.”); State Bar of Wis. Prof'l Ethics Op. E-00-3 (“certain papers maintained by the lawyer in client files may be the work product of the lawyer and need not be produced to the client on demand.” Still others consider the circumstances in determining whether internal work-product must be included in the client file. See, e.g., The Bar Ass'n of S.F., Opinion 1990-1 (“It is the opinion of the Committee that there is no ethical obligation upon an attorney to disclose his or her uncommunicated or absolute work product, unless the failure to do so would result in reasonably foreseeable prejudice to the client's rights, as described above.”); White v. Experian Info. Solutions, Inc., No. SACV 05-1070 DOC 2009 WL 4267843 (C.D. Cal. Nov. 23, 2009) (reaching the same conclusion as Opinion 1990-1).

One exception to the obligation to provide the client with a copy of the file is where the client owes an unpaid fee. When a fee is outstanding, some jurisdictions permit an attorney to assert a retaining lien against the client file. Similar to a mechanic's lien, a retaining lien is a common law right to hold a former client's file documents, money, or other property until the attorney's fee is paid. See, e.g., Pomerantz v. Walter Leiter, et. al., 704 F.2d 681 (2d Cir. 1983). However, courts often find retaining liens impermissible where “exigent circumstances” exist ' for instance, where the client lacks the means to pay and will be prejudiced if the file is withheld. Id.

As with grounds for withdrawal, engagement letters may be used to outline how the client file will be handled upon conclusion of the matter. A carefully drafted engagement letter should address items like who will pay the cost of producing the client file (including lawyer and staff time), whether the firm will retain a copy of the file, and what documents will be destroyed, and should explain the firm's right to assert a retaining lien if fees are outstanding upon conclusion of the matter. See, e.g., N.Y.C. Bar Ass'n Op. 2008-1 (approving provisions in retainer agreements and engagement letters “authorizing the lawyer at the conclusion of a matter or engagement to return all client documents to the client or to discard some or all such documents.”); State Bar of Wis. Prof'l Ethics Op. E-00-3 (“Lawyers also should consider including in their retainer agreements an explanation (consistent with the Rules of Professional Conduct) that clients may access their files, and the costs may be incurred by clients for the retrieval of such files.”).

Conclusion

Even though ending an attorney-client relationship is seldom easy, planning for the end will make things easier for all involved. Law firms should carefully review their engagement letters to ensure they specify permissible grounds for terminating the attorney-client relationship and outline how the client file will be handled upon conclusion of the matter.

Cara E. Greene is an associate at Outten & Golden LLP in New York City. She advises attorneys and other executives, professionals, and employees in their employment and partnership matters, and regularly writes and speaks on attorneys' ethical obligations. Effective Jan. 1, she will join Outten & Golden's partnership.

As Neil Sedaka sang, “Breaking up is hard to do.” It is even harder to do if the relationship in question is between an attorney and client. Once an attorney commits to representing a client, he or she may only withdraw from the representation if permitted or required to do so under the ethics rules. However, even when an attorney is able to do so, the ethics rules dictate how client files and outstanding fees will be addressed. Luckily, these issues can be anticipated and addressed preemptively through a carefully drafted engagement letter.

When Is a Firm Required or Permitted to Withdraw from Representing a Client?

Firms may limit the scope of their representation of clients to a particular matter or stage. See Am. Bar. Ass'n. Model Rules of Prof'l Conduct (“Model Rules”) Rule 1.2(c) (“A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.”). Once a firm takes on a client, however, it is required to represent the client diligently and competently. See Model Rules 1.3, 1.1. So are there ever circumstances justifying a firm's withdrawal from a representation it has agreed to undertake? Yes; in fact, an attorney may be required to withdraw in certain circumstances.

The general rule is that a firm is required to withdraw from representation in three situations: If continuing the representation will result in a violation of the law or rules, if the attorney is unable to represent the client due to a physical or mental if impairment, or if the client fires the attorney/firm. See Model Rule 1.16(a). Some jurisdictions add a fourth ground for mandatory withdrawal ' the client is bringing the lawsuit merely to harass or injure another person. See, e.g., N.Y. Rules of Prof'l Conduct Rule 1.16(a)(4); Cal. Rules of Prof'l Conduct Rule 3-700(B).

Mandatory withdrawal also is required when conflicts arise during the course of concurrent representation and the conflict either cannot be waived or one party will not agree to waive the conflict. See Model Rule 1.16(a)(1); see also N.Y.C. Bar Ass'n. Comm. on Prof'l & Judicial Ethics, Formal Op. 2005-05, 2005 WL 6631005 (2005) (“when two clients will not consent to a conflict of interest, and the conflict requires consent, the law firm must withdraw from representation of at least one of the clients.”). Importantly, an attorney generally may not drop an existing client in the midst of an active representation, like a “hot potato,” so that they may take on a new representation. See, e.g., Restatement (Third) of the Law Governing Lawyers (2000) ' 132, Reporter's notes to cmt. c; In re Rite Aid Corp. Sec. Litig., 139 F. Supp. 2d 649, 658 n.15 (E.D. Pa. 2001); Merck Eprova AG v. Prothera, Inc. , 670 F.Supp.2d 201 (S.D.N.Y. 2009); N.Y.C. Op. 2005-02 (2005).

More often, the question firms face is not “must we fire the client,” but “may we fire the client.” The Model Rules recognize seven grounds for permissive withdrawal:

(1) withdrawal can be accomplished without material adverse effect on the interests of the client; (2) the client persists in a course of action involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent; (3) the client has used the lawyer's services to perpetrate a crime or fraud; (4) the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement; (5) 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; (6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or (7) other good cause for withdrawal exists.

Model Rule 1.16(b).

Other jurisdictions recognize additional grounds, such as the client fails to cooperate in the representation, the attorney is unable to work with co-counsel, and the attorney's own mental or physical condition makes it difficult to carry out the representation. See, e.g., N.Y. Rules of Prof'l Conduct Rule 1.16(c); Cal. Rules of Prof'l Conduct Rule 3-700(C).

Engagement letters are an ideal vehicle for outlining the circumstances under which a firm may withdraw as counsel. In many jurisdictions, an engagement letter may set forth other grounds for terminating the client-attorney relationship, as long as they are consistent with the grounds set forth in Rule 1.16. See, e.g., NYSBA Formal Opinion 719 (1999). For instance, an engagement letter may specify that a firm may withdraw from representation if, after investigation or consultation with experts, the firm is convinced that the defendant is not liable. See NY State Bar Ass'n. Comm. on Prof'l Ethics, Formal Op. (“NYSBA Formal Opinion”) 440 (1976).

The existence of an engagement letter specifying certain grounds for terminating the client-attorney relationship does not relieve a firm of its obligation to seek the court's permission, if necessary. See NYSBA Formal Opinion 440. Nor may an engagement letter “mislead the client with regard to the attorney's obligations, including the obligation to continue as counsel in the absence of a permissible ground for withdrawing from the representation.” NYSBA Formal Opinion 719.

Does the Firm Have Additional Responsibilities When Withdrawing from a Client Matter?

After a firm withdraws from representing a client, there often are loose ends to tie up ' the file must be produced to the client and outstanding fees must be resolved. When withdrawing as counsel, the ethics rules are clear that attorneys must minimize prejudice to the client by, among other things, providing the client with a copy of her file when necessary. See Model Rule 1.16(d) (“a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred ' “).

What is not as clear is what constitutes the “client file.” Some jurisdictions, such as New York, define “client file” broadly to include things like attorney work product and internal e-mails. See, e.g., Sage Realty Corp. v. Proskauer Rose Goetz & Mendelsohn LLP , 91 N.Y.2d 30, 34 (1997) (noting that a former client's right to the file includes not only final versions of documents or correspondence, but also legal memoranda, drafts and notes, etc., although excluding documents intended solely for internal law office review and use); N.Y.C. Bar Ass'n Op. 2008-1 (interpreting Sage Realty to require the production of electronically stored information as part of the client file). Other jurisdictions take a more restrictive view of what constitutes the “client file.” See, e.g., State Bar of S.D., Ethics Op. 96-7 (Oct. 2, 1996) (stating that a “lawyer need not deliver his/her internal notes and memos generated primarily for his/her own purposes in working on the client's problem,” but noting that “a lawyer should deliver all other material which may be deemed useful to the client in benefitting fully from the services he/she purchased from [the] firm.”); State Bar of Wis. Prof'l Ethics Op. E-00-3 (“certain papers maintained by the lawyer in client files may be the work product of the lawyer and need not be produced to the client on demand.” Still others consider the circumstances in determining whether internal work-product must be included in the client file. See, e.g., The Bar Ass'n of S.F., Opinion 1990-1 (“It is the opinion of the Committee that there is no ethical obligation upon an attorney to disclose his or her uncommunicated or absolute work product, unless the failure to do so would result in reasonably foreseeable prejudice to the client's rights, as described above.”); White v. Experian Info. Solutions, Inc. , No. SACV 05-1070 DOC 2009 WL 4267843 (C.D. Cal. Nov. 23, 2009) (reaching the same conclusion as Opinion 1990-1).

One exception to the obligation to provide the client with a copy of the file is where the client owes an unpaid fee. When a fee is outstanding, some jurisdictions permit an attorney to assert a retaining lien against the client file. Similar to a mechanic's lien, a retaining lien is a common law right to hold a former client's file documents, money, or other property until the attorney's fee is paid. See, e.g., Pomerantz v. Walter Leiter, et. al., 704 F.2d 681 (2d Cir. 1983). However, courts often find retaining liens impermissible where “exigent circumstances” exist ' for instance, where the client lacks the means to pay and will be prejudiced if the file is withheld. Id.

As with grounds for withdrawal, engagement letters may be used to outline how the client file will be handled upon conclusion of the matter. A carefully drafted engagement letter should address items like who will pay the cost of producing the client file (including lawyer and staff time), whether the firm will retain a copy of the file, and what documents will be destroyed, and should explain the firm's right to assert a retaining lien if fees are outstanding upon conclusion of the matter. See, e.g., N.Y.C. Bar Ass'n Op. 2008-1 (approving provisions in retainer agreements and engagement letters “authorizing the lawyer at the conclusion of a matter or engagement to return all client documents to the client or to discard some or all such documents.”); State Bar of Wis. Prof'l Ethics Op. E-00-3 (“Lawyers also should consider including in their retainer agreements an explanation (consistent with the Rules of Professional Conduct) that clients may access their files, and the costs may be incurred by clients for the retrieval of such files.”).

Conclusion

Even though ending an attorney-client relationship is seldom easy, planning for the end will make things easier for all involved. Law firms should carefully review their engagement letters to ensure they specify permissible grounds for terminating the attorney-client relationship and outline how the client file will be handled upon conclusion of the matter.

Cara E. Greene is an associate at Outten & Golden LLP in New York City. She advises attorneys and other executives, professionals, and employees in their employment and partnership matters, and regularly writes and speaks on attorneys' ethical obligations. Effective Jan. 1, she will join Outten & Golden's partnership.