Risk Update

Engaging on Engagement Letters — (You Should Use Them, Carefully)

Posted Dan Bressler

“The Limited Engagement Letter and Legal Malpractice” —

  • “One hires an attorney to handle a case and expects that the attorney will handle the entire case at a level of good practice to which a competent attorney should adhere. No? Well not necessarily, as Attallah v Milbank, Tweed, Hadley & McCloy, LLP 2019 NY Slip Op 00583 [168 AD3d 1026] January 30, 2019 Appellate Division, Second Department tell us.”
  • “‘This engagement does not, however, encompass any form of litigation or, to the extent ethically prohibited in this circumstance, the threat of litigation, to resolve this matter. This engagement will end upon your re-admittance to the College or upon a determination by the attorneys working on this matter that no non-litigation mechanisms are available to assist you. The scope of the engagement may not be expanded orally or by conduct; it may only be expanded by a writing signed by our Director of Public Service.'”
  • “The letter of engagement conclusively demonstrated that there was no promise to negotiate. There was only a promise to investigate and consider whether there were any options possibly available to urge the school to reconsider the plaintiff’s expulsion. Anything else, including the defendant’s failure to commence litigation against the school and the defendant’s alleged rendering of legal advice regarding the efficacy of the plaintiff’s commencing a defamation action against others, was outside the scope of the letter of engagement.”
  • After various facts played out and an unhappy client sued, said the Court: “‘An attorney may not be held liable for failing to act outside the scope of a retainer (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428 [2007]). Therefore, since the defendant’s alleged failure to negotiate with the school, its alleged failure to commence litigation against the school, and its alleged failure to properly advise the plaintiff on the efficacy of a defamation action against nonschool parties fell outside the scope of the parties’ letter of engagement, dismissal of the cause of action alleging legal malpractice was warranted, pursuant to CPLR 3211 (a) (1), on documentary evidence grounds.'”

“Are Pre-Engagement Lawyer-Client Arbitration Agreements Enforceable?” —

  • Hypothetical: “A former client brought a legal malpractice claim against Bob… After he read the state-court complaint, Bob was pleased and even felt a little vindicated because he was certain the court would send the malpractice case to arbitration. Why? Because Bob’s carefully crafted engagement letter attached a document titled ‘Engagement Terms and Policies.'”
  • “That document included the following: ‘Any dispute, claim or controversy arising out of any fees, billing practices or this engagement shall be settled by binding arbitration before a single arbitrator in Philadelphia, in an arbitration that ABC Co. administers. The arbitrator’s decision shall be final and binding on the parties. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.'”
  • “American Bar Association Formal Ethics Opinion 02–425 likewise states that ‘mandatory arbitration provisions are proper unless the retainer agreement insulates the lawyer from liability or limits the liability to which she otherwise would be exposed under common or statutory law.'”
  • “Courts that have considered whether to enforce a pre-attorney client relationship arbitration agreement, including Mackin Medical v. Lindquist & Vennum, 2018 Phila. Ct. Com. Pl. LEXIS 146 (C.P. Phila. Dec. 26, 2018), have put teeth into Explanatory Comment 14 of Rule 1.8. Not by vaguely pontificating that ‘the client be fully informed of the scope and effect of the arbitration agreement.’ But by identifying the requirements for an agreement that satisfies their concerns.”
  • “The result: a detailed road map for an enforceable pre-engagement lawyer-client arbitration agreement, which will allow the prospective client to make an informed decision regarding the proposed representation.”
  • That roadmap comprises 11 elements. For that detail, see the full article.