Ten Carat Engagement Letters

“I never worry about diets. The only carrots that interest me are the number you get in a diamond.”  -Mae West

Engagement rings signify commitment between two people who intend to bind themselves to one another under the law.  They are the worldly manifestation of a relationship.  For lawyers, entering into an attorney-client relationship can be just as binding and weighty a decision, and last year the Massachusetts Rules of Professional Ethics decreed that all lawyer/client relationships require a written engagement letter.

The new Rule provides that a lawyer must memorialize in writing “within a reasonable time after commencing the representation” the scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible.  Mass. R. Prof. C. 1.5(b).  The only exceptions to this requirement are (a) with a regularly-represented client who will be charged on the same basis or rate, (b) single-session legal consultations, (c) where the attorney reasonably expects the total fee will be less than $500, or (d) when an indigent representation fee is imposed by a court.  Id.  Just like the four Cs guide the purchase of an engagement ring – carat, cut, color, and clarity – some guidelines apply to a well drafted engagement letter.

Format of Communication

The engagement can be memorialized in a letter, a memorandum, or even an email.  While it is always a good practice to have the agreement signed by both the attorney and the client – and especially where the agreement contains some commitment by the client, such as to arbitrate fee disputes or to furnish a retainer – the Rule does not require a client’s signature.

Scope of Representation

It seems obvious, but a client needs to be told what you will be doing for the client and what you will not be doing.  See, e.g., Mass. R. Prof. C. 1.2 (“A lawyer may limit the objectives of the representation if the client consents after consultation.”).

Example:  “We will represent you solely in connection with Adversary Proceeding No. 13-XXXX pending in United States Bankruptcy Court for the Eastern District of Massachusetts.  Our acceptance of this engagement does not involve an undertaking to represent you or your interests in any other matter or in connection with providing any tax or financial advice or advice with respect to insurance issues.”

Basis or Rate of the Fee and Expenses

If rates will be hourly, then the specific rate should be set out in writing.  Many attorneys include in their letters a statement that hourly fees are increased periodically.  Before actually charging the new rate, however, you should advise the client in writing that rates are being increased.

If a flat fee is going to be charged for certain services, the letter should be clear as to what services will actually be rendered and what events will trigger the payment of the fee(s).

Expenses also must be described in sufficient detail.  If a lawyer does not plan to charge actual out-of-pocket cost, he or she must explain how expenses are calculated.

Example:  “We will include on our statements separate charges for out of pocket expenses such as expenses for photocopying, messenger and delivery service, computerized research, travel, long-distance telephone and telecopy, and search fees.  In litigation matters, our expenses may also include filing fees, deposition costs, process servers’ fees, court reporters and witness fees, which will also be billed separately on our statements.  The charges for our out-of-pocket expenses will not be marked up or discounted.”

Other Items to Consider

• Retainer.  Beyond specifying the amount, it is a good practice to advise whether the retainer will be held as security or whether you will bill against it (and when/if it will be replenished).

• Arbitration of Fee Disputes.  Since collection actions filed in Superior Court are often met with a malpractice counterclaim, it is worth considering a provision that all fee disputes be resolved at the Massachusetts Bar Association Legal Fee Arbitration Board.
• Termination. 

Example:  “Our engagement may be terminated by either one of us upon written notice to the other.  Your termination of our services will not affect your responsibility for payment of outstanding invoices and for accrued fees and expenses incurred before termination or in connection with an orderly transition of the matter.”

If the engagement is terminated by either side, the attorney must memorialize this in writing.

• No Guarantee of Success.

Example:  “It is impossible to provide any promise or guarantee about the outcome of the Litigation.  However, during the course of this engagement, we may express opinions or beliefs to you about the effectiveness of various courses of action or about the results that might be anticipated.  Such statements are expressions of opinion only, and should not be construed as promises or guaranties.”

• Estimate of Fees.

Example:  “The fees and costs relating to this matter are not predictable.  Accordingly, we have made no commitment to you concerning the maximum fees and costs that will be necessary to resolve or complete this matter.  Any estimate of fees and costs that we may have discussed represents only an estimate of such fees and costs.  It is also expressly understood that payment of the firm’s fees and costs is in no way contingent on the ultimate outcome of the matter.”