Section 2.1: Formation, Contracts, and Communication

Formation, Contracts, and Communication

The client-lawyer relationship is a fiduciary relationship founded on trust, consent, and clear standards of professional conduct. It is typically formed when a client and a lawyer enter into an express agreement. However, formation can also occur by implication or through a court appointment. Understanding how this relationship is created, how fee contracts must be structured, and how communication must be maintained is critical for MPRE success.

Formation of the Client-Lawyer Relationship

Although the client-lawyer relationship is generally contractual, it does not require a formal signed contract, retainer, or payment of fee to arise. There are three primary mechanisms of formation:

1. Express Agreement: The client manifests an intent to retain the lawyer, and the lawyer manifests consent to provide the legal services. This is typically done through an engagement letter or a signed retainer agreement.
2. Implied Agreement (Representation by Estoppel): Under the Restatement (Third) of the Law Governing Lawyers § 14, a relationship is formed when a person manifests to a lawyer the intent that the lawyer provide legal services, and the lawyer either (a) manifests consent, or (b) fails to manifest lack of consent and knows or should know that the person is reasonably relying on the lawyer to provide the services. For example, if a prospective client presents details of an injury to a lawyer, and the lawyer says, "I will look into the matter and check the filing deadline," but fails to follow up, and the client relies on this silence to their detriment (such as letting a statute of limitations expire), a client-lawyer relationship is deemed to exist. The lawyer can be held liable for malpractice and subject to discipline for neglecting the matter. To avoid implied formation, a lawyer who does not wish to accept a case must explicitly and clearly state to the prospective client in writing that they are declining the representation (often called a "non-engagement letter").
3. Court Appointments: Under Model Rule 6.2, a lawyer must not seek to avoid appointment by a tribunal to represent a person except for "good cause." Good cause exists if:
   • Representing the client is likely to result in a violation of the Rules of Professional Conduct or other law (e.g., a severe conflict of interest under Rule 1.7 or Rule 1.9).
   • Representing the client is likely to result in an unreasonable financial burden on the lawyer.
   • The client or the cause is so repugnant to the lawyer as to be likely to impair the client-lawyer relationship or the lawyer's ability to represent the client.

Fees and Fee Agreements (Rule 1.5)

Model Rule 1.5 regulates the financial aspects of the client-lawyer relationship. The foundational rule is that a lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses.

Reasonableness Factors

Rule 1.5(a) sets out eight factors to determine if a fee is reasonable:

• The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly.
• The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer.
• The fee customarily charged in the locality for similar legal services.
• The amount involved and the results obtained.
• The time limitations imposed by the client or by the circumstances.
• The nature and length of the professional relationship with the client.
• The experience, reputation, and ability of the lawyer or lawyers performing the services.
• Whether the fee is fixed or contingent.

Communication Requirements

Under Rule 1.5(b), the scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible must be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation. The only exception is when the lawyer regularly represents the client on the same basis or rate; any changes in the basis or rate of the fee or expenses must also be communicated to the client.

Contingency Fees

A contingency fee is a fee that is paid only if the client wins or settles the case. Rule 1.5(c) imposes strict requirements on contingency fees:

• Writing and Signature: A contingency fee agreement must be in a writing signed by the client.
• Method of Calculation: The writing must 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.
• Expense Deductions: It must specify whether litigation and other expenses are to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingency fee is calculated.
• Client Obligations: The agreement must clearly state any expenses for which the client will be liable, whether or not the client is the prevailing party.
• Settlement Statement: Upon conclusion of a contingency fee matter, the lawyer must provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.

Forbidden Contingency Fees

Under Rule 1.5(d), contingency fees are strictly prohibited in two situations:

1. Domestic Relations Matters: A lawyer cannot charge a fee contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof. This is because public policy favors the reconciliation of families, and contingency fees give lawyers a financial incentive to discourage reconciliation. However, a contingency fee is permitted to collect past-due alimony or child support (arrears) because this is a debt collection action, not a domestic relations dispute over the creation of the support obligation.
2. Criminal Matters: A lawyer cannot charge a contingency fee for defending a defendant in a criminal case. This prohibition applies to all stages of a criminal proceeding, including pre-trial representation, trial, and appeal.

Division of Fees (Fee Splitting)

Under Rule 1.5(e), a division of a fee between lawyers who are not in the same firm may be made only if:

1. The division is in proportion 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 share each lawyer will receive, and the agreement is confirmed in writing; and
3. The total fee is reasonable. Referral fees—where a lawyer receives a fee simply for referring a case to another firm without doing work or assuming joint responsibility—are prohibited.

The Duty of Communication (Rule 1.4)

A lawyer has an ongoing obligation to keep the client informed and involved in the representation. Under Rule 1.4, a lawyer must:

• Promptly inform the client of any decision or circumstance that requires the client's informed consent (e.g., a settlement offer or a plea bargain).
• Reasonably consult with the client about the means by which the client's objectives are to be accomplished.
• Keep the client reasonably informed about the status of the matter (e.g., progress in negotiations or upcoming court dates).
• Promptly comply with reasonable requests for information.
• Consult with the client about any relevant limitation on the lawyer's conduct when the lawyer knows the client expects assistance not permitted by the Rules of Professional Conduct or other law (e.g., if a client asks the lawyer to assist in fraud).
• Explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

Settlement and Plea Offers

A lawyer must promptly communicate all settlement offers in civil cases and plea bargains in criminal cases. A lawyer cannot reject or accept an offer on behalf of a client without the client's consent, even if the lawyer believes the offer is ridiculous or highly unfavorable, unless the client has previously authorized the lawyer to accept or reject specific offers.