A lawyer’s retention agreement has two general purposes. It memorializes what the lawyer has advised the client regarding the objectives of the representation, the way those objectives will be pursued, and the anticipated costs. But it also protects the lawyer against potential malpractice claims. A carefully-drafted agreement can be a lethal arrow in a lawyer’s quiver when defending against a legal-malpractice claim. A poorly-drafted agreement may arm the client’s new lawyer even when the malpractice claim is otherwise weak.
ABA Model Rule of Professional Conduct 1.2(c) provides that “[a] lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” Lawyers should not only limit the scope of the representation, but they should anticipate collateral matters that should be specifically excluded from the representation. There’s been a recent spike in malpractice lawsuits where clients claim that lawyers should’ve represented them in some collateral matter. Both the client and the lawyer are best served by clarity from the outset. Three examples, drawn from recent Michigan cases, illustrate the point.
Case No. 1: The Fill-in-the-Blank Lawyer
An all-too-typical retention agreement begins, “Lawyer agrees to represent the client’s interests with regard to _________________.” Lawyers often take that blank too lightly and fail to properly limit the representation. In Case No. 1, the lawyer wrote that he would “represent the client’s interests with regard to the purchase of assets” located at a particular address.
The lawyer was, in fact, retained only to prepare the documents necessary to finalize a deal that the parties had already negotiated without the aid of counsel. But after the deal closed and the client began operating the business, he found that the business wasn’t as profitable as the seller represented. The client sued the lawyer and the seller. Given the lawyer’s failure to limit the scope of his representation to the preparation of documents, the client argued that the lawyer failed to advise him that the business was a poor investment. A written agreement that specifically excluded business advice would’ve gone a long way toward supporting a summary-judgment motion.
Case No. 2: The Lawyer Who Unwittingly Became a Mortgage Broker
A lawyer must carefully consider the language chosen to limit the scope of representation. While this observation seems obvious, practical application can sometimes prove difficult. Define and limit the representation—simply defining the representation may not be enough. In Case No. 2, the client retained the lawyer after her failure to make mortgage payments subjected her to foreclosure on her home. The lawyer defined the scope of his representation as follows:
Attorney will provide assistance and consultation in obtaining the following:
A. A settlement agreement with the lien holder releasing the lien; and
B. Refinancing on the property.
With respect to section B, the lawyer merely referred the client to a mortgage broker who attempted to find financing. After the applicable statute of limitations expired, the client filed a malpractice claim. In response to the lawyer’s summary-judgment motion, the client asked to amend the complaint to assert that the lawyer violated statutes applicable to mortgage brokers. The client relied on section B of the retention agreement. The lawyer’s attempt to limit the scope of his representation arguably expanded his role beyond legal services.
Case No. 3: The Accidental No-Fault Lawyer
In Case No. 3, the client retained the lawyer to pursue workers’ compensation benefits after the client was severely injured driving his employer’s truck. The client told the lawyer that he retained another lawyer to pursue his claim for “first party” No-Fault benefits. But after the limitation period expired on that claim, the client sued his workers’ compensation lawyer for failing to pursue it. While the lawyer entitled his agreement, “Workers’ Compensation Retainer Agreement,” he didn’t specifically exclude representation in connection with No-Fault benefits. Summary judgment would’ve been proper given that the scope of the lawyer’s representation was well-defined within the agreement. Unfortunately, once it was brought to the lawyer’s attention that a No-Fault claim had not been filed, the lawyer immediately served the insurer with a letter demanding payment which, in turn, created a question of fact regarding the scope of the lawyer’s representation.
The message is simple, but too often overlooked. No matter what your area of practice, take the time to thoroughly analyze any existing or potential collateral matters that fall outside the scope of your representation. Like other service providers who disclose that they “don’t do windows,” lawyers should identify all foreseeable collateral matters. Exclude those matters in writing, inform the client of any applicable time-limitation periods, and direct the client to seek separate representation on those matters.