Put it in Writing

March 23, 2004

Submitted by Douglas J. Brocker

This article is the latest installment in a series concerning the most recent revisions to the Rules of Professional Conduct, which took effect on March 1, 2003. In the series of articles, the author discuss the practical implications of the more significant changes to the Rules of Professional Conduct.

In the Revised Rules of Professional Conduct, the State Bar has codified the old adage: “It’s better to put it in writing.” The recent revisions added numerous new writing requirements for certain fee agreements and waivers of conflicts of interest from clients. Some of the revisions require a writing signed by the client, while others merely require written confirmation to the client.

I. Contingent Fee Agreements and Splitting Fees among Different Firms

Three of the revisions concern writing requirements for certain types of fee agreements, which are all set forth in Revised Rule 1.5. First, the State Bar made a significant change relating to contingent fee agreements. Under Revised Rule 1.5(c), all contingency fee agreements now must:

  1. Be in writing
  2. Be signed by the client
  3. State the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial, or appeal
  4. Specify which litigation expenses will be deducted from the recovery and whether those expenses will be deducted before or after the contingent fee is calculated
  5. Clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party.

Thus, any matter being handled under a contingent fee arrangement must have such a written, signed fee agreement. Although contingent fees are the only type of fee arrangements that require a writing, the State Bar and professional liability carriers, such as Lawyers Mutual, highly encourage lawyers to use written contracts for all fee agreements. See 97 FEO 4.

Second, Revised Rule 1.5(c) further requires that, at the conclusion of a contingent fee case, the lawyer provide a written settlement statement to the client stating the outcome of the case, “and, if there is a recovery, showing the remittance to the client and the method of its determination.” This new provision is in addition to the requirement set forth in Revised Rule 1.15-3(d)(i). This latter rule applies to all matters, not just contingency fee cases, and requires the lawyer to provide a written accounting to the client upon complete disbursement of all trust funds.

Third, Revised Rule 1.5(e) governs agreements to split fees between lawyers in separate firms. This rule requires that:

  1. The division of fees is proportional to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation
  2. The client agrees to the arrangement, including the division of fees, and the agreement is confirmed in writing
  3. The total fee is reasonable

Revised Rule 1.5(e) does not require the written confirmation to be signed by the client.

II. Waivers of Conflicts of Interest

Numerous revisions to the Revised Rules now impose writing requirements before a current, former, or prospective client may waive a conflict of interest effectively. A critical aspect of all these requirements is the concept of “informed consent,” which is used throughout the Revised Rules. Informed consent replaced the phrase, “consent after consultation,” which was used in the former rules.

Revised Rule 1.0(f) states: “’Informed consent’ denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation appropriate to the circumstances.” The communication necessary to obtain such consent varies depending on the Revised Rule and circumstances involved. Generally, however, a lawyer must disclose the following information to a client to obtain informed consent:

  • The facts and circumstances giving rise to the situation
  • An explanation of the material advantages and disadvantages of the proposed course of conduct
  • A discussion of the client’s options and alternatives

Comment [6], Revised Rule 1.0. Such disclosure must be reasonably adequate, taking into account whether the client is experienced in legal and other matters and whether the client is independently represented. In certain circumstances set out in the Revised Rules, the lawyer also must recommend that the client seek the advice of other independent counsel to meet this requirement. See Rule 1.8(a).

There are numerous Rules in which informed consent is used in conjunction with a new or revised writing requirement. For example, under Revised Rule 1.8(a), a lawyer shall not enter into a business transaction with a client unless the attorney:

  1. Fully discloses to the client in writing the transaction and terms in a manner that can be understood by the client
  2. Advises the client in writing to seek the advice of an independent lawyer
  3. Obtains informed consent in a writing signed by the client to the essential terms of the transaction, including the lawyer’s role.

Additionally, Revised Rule 1.8(g) now requires that a lawyer, who represents two or more clients in making an aggregate settlement or plea agreement, must obtain informed consent in a writing signed by the client. To obtain such consent, the lawyer must disclose the existence and nature of all claims or pleas involved and the participation of each person.

Perhaps most significantly, for a current, former, or prospective client to waive a conflict of interest effectively, the following Revised Rules require a lawyer to obtain informed consent, confirmed in writing: • Revised Rule 1.7(b)(4) (from each affected current client)

  • Revised Rule 1.9(a) (from any affected former client)
  • Revised Rule 1.10(d) (from each affected client for any conflicts imputed to other members of the same firm)
  • Revised Rule 1.11(a)(3) (from the appropriate government agency for any matter in which the lawyer personally and substantially participated as a public officer or employee)
  • Revised Rule 1.12(a) (from all parties to a proceeding in which the lawyer formerly acted as a judge, other adjudicative officer, law clerk, arbitrator, mediator, or other third-party neutral)
  • Revised Rule 1.18(d) (from both the new affected client and the former prospective client)

Under these Revised Rules, a lawyer may represent a client notwithstanding a conflict of interest if the lawyer obtains informed consent, which is confirmed in writing, as well as satisfying any other requirements necessary to waive the conflict. Under the former rules, a lawyer merely had to get the client’s consent after consultation.

As an illustration, suppose a lawyer wants to represent multiple clients in claims arising from the same automobile accident. At a minimum, the lawyer would need to discuss the following issues and include them in a written confirmation to the potential clients:

  • The sharing of confidential information between the lawyer and the common clients and the potential waiver of the attorney-client privilege
  • The possible conflicting interests, such as insufficient liability coverage
  • The possibility that the lawyer may have to withdraw from representation of all clients if a conflict develops
  • Other risks and advantages involved in common representation.

See Comments [29]-[33], Revised Rule 1.7; RPC 251.

The recent revisions to the Revised Rules impose these new writing requirements and the concept of informed consent at least in part to clarify and document the understanding between attorneys and clients. Anytime you: (1) enter into a contingent fee agreement, (2) agree to divide fees with another firm, or (3) obtain a waiver of a conflict of interest, you should consult and read carefully the above Revised Rules and Comments thereto before proceeding. This may prevent not only a potential violation of the Revised Rules but also may save you unnecessary time and anxiety if a dispute develops later.