Ethics Question of the Month - March 2019

Lawyer A represents Client B in a partnership dispute against Partner C.  After extensive discovery, the court orders the parties to mediation two months before the trial setting.   

At the mediation session, Partner C makes a credible settlement offer to Client B.  Lawyer A recommends that Client B accept that offer.  Client B refuses and demands to go to trial unless Partner C makes a substantially higher offer.

Lawyer A is concerned that Partner C came across much better in his deposition than Client B, and the documents seem to support Partner C’s position. Lawyer A thinks there is a good chance that Partner C will prevail at trial, or, even if Client B prevails, his damage model is weak, and the jury is very likely to award damages significantly less than Partner C’s current settlement offer. Of course, a modest recovery by Client B means a modest contingent fee for Lawyer A.  Accordingly, Lawyer A tells Client B that he will withdraw his representation unless Client B accepts the settlement offer.  

Lawyer A tells Client B that he can hire a new lawyer and take this case to trial if he wishes. He also tells the client that the court will grant a continuance of the current trial setting because this is only the second trial setting.   The likely continuance should provide Client B plenty of time to hire new counsel.

Which statement most accurately addresses whether Lawyer A can withdraw? 

A.    Lawyer A can withdraw, but only after he secures a continuance of the current trial setting.
B.    Lawyer A can withdraw unconditionally because his client is making the representation unreasonably difficult by not accepting a recommended settlement offer.
C.    Lawyer A cannot withdraw because, under these circumstances, withdrawal would have a materially adverse effect on the client.
D.    Lawyer A cannot withdraw because he cannot guarantee that he will be able to persuade the court to grant a continuance.
E.    We don’t have enough facts to know whether Lawyer A can withdraw.

ANSWER:  C 

DISCUSSION:

Rule 1.15(b) of the Texas Disciplinary Rules of Professional Conduct governs the conditions under which a lawyer is permitted to withdraw:  

(b) Except as required by paragraph (a), a lawyer shall not withdraw from representing a client unless:
(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 may be criminal or fraudulent;
(3) the client has used the lawyer's services to perpetrate a crime or fraud;
(4) a client insists upon pursuing an objective that the lawyer considers repugnant or imprudent or with which the lawyer has fundamental disagreement;
(5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services, including an obligation to pay the lawyer's fee as agreed, 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.

ANALYSIS:

The rule generally prohibits withdrawal, subject to several exceptions. Unless one of the exceptions applies, withdrawal is not permitted. 

These facts do not implicate exceptions (b)(2), (3), and (5). Client B has not perpetrated a fraud or a crime, nor failed to pay a bill. At worst, the client is merely making unwise strategic decisions regarding settlement.  

Exception (b)(4) doesn’t apply where a client merely refuses to accept a settlement that the lawyer recommends.  Under Rule 1.02, clients alone make settlement decisions.  The risk that a client may not accept a settlement that is reasonable to the lawyer is part of the risk that justifies a contingent fee agreement—and risk is essential to justify that type of fee.

Exception (b)(6) should not apply where the only issue is a client’s refusal to accept a settlement offer that the lawyer recommends.  In a contingent fee setting, the mere fact that the lawyer cannot be assured of receiving fees is not “an unreasonable financial burden” that justifies withdrawal.  Nor does a client’s refusal to settle make the representation “unreasonably difficult” as that concept typically means something other than that the client is exercising a right that Texas law recognizes.

Exception (b)(7) is a catch-all basis for other grounds that are not otherwise set out in Rule 1.15. However, this provision does not permit withdrawal where the only basis is that the client is exercising a right to choose whether to settle under Rule 1.02.

The best chance for justifying withdrawal is exception (b)(1), but even that one is fraught with peril.  There is no guarantee that a continuance will be granted. If not, a material adverse effect on the client’s interest is almost certain. While there are lawyers who can competently try a case on two months notice, the mere fact that there are only two months or less remaining narrows the pool of lawyers who are available and willing to undertake a new case.  The short lead-time may prejudice the client’s ability to acquire competent representation on appropriate financial terms; a lawyer hired shortly before trial may want a larger contingent percentage or some other fee arrangement that is less advantageous to the client.  

Although we are told that discovery has been conducted, we don’t know whether the client will be left in the lurch with the withdrawal.  For example, we know nothing about any pending motions or whether the withdrawing lawyer hasn’t yet filed and/or argued all appropriate motions.  Would new counsel be walking into a case where there is too little time to file needed motions or have them heard by the court with a reasonable chance of success—or would new counsel be scrambling to argue already-filed motions with which the new counsel may have some disagreement?  And there might be unfinished discovery or other considerations that might significantly disadvantage a client.

CONCLUSION: The lawyer does not have a legitimate basis for withdrawal, unless he or she can establish that “withdrawal can be accomplished without material adverse effect on the interests of the client.”  While an argument for E could be made, it is very likely that no matter what facts are established, C will turn out to be true.
 

Posted: 2/27/2019 12:00:00 AM by TCLE Editor | with 0 comments

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About Ethics Question of the Month

Ethics Question of the Month is a regular feature of the Texas Bar Journal created and sponsored by the Texas Center for Legal Ethics.

DISCLAIMER: The information contained in Ethics Question of the Month is intended to illustrate an ethics issue of general interest in the Texas legal community; it is not intended to provide ethics advice that applies regardless of particular facts.  For specific legal ethics advice, readers are urged to consult the Texas Disciplinary Rules of Professional Conduct (including their official comments) and other authorities and/or a qualified legal ethics advisor.

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