Year 1988 Ethics Opinions
THE ASSOCIATION OF
THE BAR OF THE CITY OF NEW YORK
FORMAL OPINION 1988-4
COMMITTEE ON
PROFESSIONAL AND JUDICIAL ETHICS
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June 3, 1988
ACTION: Formal
Opinion
OPINION:
The inquirer was formerly a
partner in a two-member law firm that represented a plaintiff in
an action for breach of a contract to purchase shares in a co-op
owned by the plaintiff. The former firm represented the plaintiff
pursuant to a contingency retainer. Approximately one year after
the action was commenced, the inquirer, while still a member of
the former firm, made a successful motion for summary judgment on
the plaintiff's behalf and obtained a judgment for a certain
amount against defendants. After restraining the defendants' bank
accounts, which contained an amount less than the amount of the
judgment, the inquirer entered into a stipulation of settlement
with the defendants on plaintiff's behalf which allowed plaintiff
to retain the monies in the bank accounts with the balance of the
judgment to be paid when the defendants' third-party claim
against their own attorneys had either been settled or proceeded
to trial.
Just over one year after judgment
had been entered, defendants, represented by new counsel, made a
motion to vacate the judgment and set aside the stipulation of
settlement based on newly discovered evidence. According to the
inquirer, "as a courtesy to plaintiff" she prepared
papers in opposition to the defendants' motion and argued the
motion before the court. These efforts were unsuccessful,
however, and the court granted the defendants' motion, vacated
the judgment, and set aside the stipulation of settlement. At the
time this decision was entered, the inquirer's former law firm
was no longer in existence and the inquirer was associated with
another firm.
The inquirer discussed this
adverse decision with the plaintiff and advised that an appeal be
taken. Plaintiff was also advised concerning the fee structure of
the inquirer's present firm in the event the plaintiff wanted
this firm to represent him on the appeal. However, the plaintiff
stated that he was inclined to return the money received in
settlement and go forward with trial, an alternative which the
inquirer opined would be ill-advised.
In light of these developments,
i.e., the dissolution of the former firm and the judicial
decision to vacate the prior judgment and set aside the
stipulation of settlement, the inquiry is whether, in the event
the plaintiff decides not to take an appeal and to go forward
with trial, the inquirer is (1) required to return that portion
of the settlement proceeds she retained as her fee under the
contingency retainer signed by the plaintiff, or (2) obligated to
represent plaintiff at the trial in light of the fact the law
firm with which plaintiff executed the retainer agreement has
been dissolved. With respect to the subject of continued
representation of the plaintiff, the inquirer states that her
present law firm does not wish to be substituted as counsel in
this matter unless there is a different fee arrangement than the
original contingency retainer, and that, in any event, her
present relationship with the plaintiff "may not be
sufficiently compatible at this time to go forward with
representation. . . ."
The inquiry poses questions of
fact and law concerning the interpretation of the retainer
agreement itself that are beyond the jurisdiction of this
Committee. The inquirer should consult various judicial decisions
that discuss a lawyer's entitlement to fees under a contingency
retainer prior to a judgment becoming final, see, e.g., Mormilo
v. Allied Stevedores Corp., 8 A.D.2d 217 (1st Dept. 1959), and at
what point the representation contracted for in the retainer
agreement has been completed, see, e.g., Shaw v. Manufacturers
Hanover Trust Co., 68 N.Y.2d 172 (1986). In addition, we note
that in considering these issues, the inquirer should bear in
mind that New York courts tend to construe attorney-client
agreements "most favorably for the client." Shaw, 68
N.Y.2d at 177; Greenberg v. Bar Steel Construction Corp., 22
N.Y.2d 210, 213 (1968).
Despite our conclusion that the
questions presented are legal and factual in nature, further
comments are in order concerning ethical implications arising
from the circumstances presented.
First, with respect to the
drafting of future contingent fee agreements, we call the
inquirer's attention to EC 2-19, which counsels lawyers to reach
a "clear agreement with . . . client[s] as to the basis of
the fee charges to be made," and to "reduce to writing
the understanding of the parties regarding the fee, particularly
when it is contingent."
Second, DR 7-101(A)(2) provides
that a lawyer shall not intentionally "[f]ail to carry out a
contract of employment entered into with a client for
professional services, but he may withdraw as permitted under DR
2-110, DR 5-102, and DR 5-105." "Lawyers, therefore,
have an ethical obligation to perform professional services they
contract to provide until their completion, absent good cause for
withdrawal." N.Y. City 1986-6. Even in the event of
dissolution, every member of a law firm retained by a client is
obligated to fulfill the retainer agreement. See Vollgraff v.
Block, 117 Misc. 2d 489 (Sup. Ct. Suffolk Co. 1982); Resnick v.
Kaplan, 49 Md. App. 499, 434 A.2d 582 (1981); Frates v. Nichols,
167 So. 2d 77 (Fla. Dist. Ct. App. 1964). Further, we note that a
formal, written retainer is not a prerequisite to the
establishment of an attorney-client relationship. See Davis v.
State Bar, 33 Cal. 3d 231, 188 Cal. Rptr. 441, 655 P.2d 1276
(1983).
Therefore, in the event it were
determined, for example, that the inquirer's services to
plaintiff under the original retainer agreement were complete at
the time judgment was entered in favor of plaintiff and the
stipulation of settlement was signed, we believe the inquirer
should also consider whether her representation of the plaintiff
with respect to the defendants' motion to vacate the judgment and
set aside the stipulation of settlement gave rise to a new
attorney-client relationship independent of the original retainer
which requires continued representation of the plaintiff in the
event of a trial. The inquirer should consult various judicial
decisions that discuss the prerequisites for establishment of the
attorney-client relationship. See, e.g., Rosman v. Shapiro, 653
F. Supp. 1441 (S.D.N.Y. 1987); Hashemi v. Shack, 609 F. Supp. 391
(S.D.N.Y. 1984); Cooke v. Laidlaw, Adams & Peck, Inc., 126
A.D.2d 453 (1st Dept. 1987); Brandman v. Cross & Brown Co.,
125 Misc. 2d 185 (Sup. Ct. N.Y. Co. 1984).
Third, in the event the inquirer
determines that there is no obligation to represent the plaintiff
in the event of a trial, she should advise the client of her
conclusion without delay in order to avoid any prejudice. See DR
7-101(A)(3). The inquirer should also advise the client
concerning any procedural steps that should be taken to protect
the client's interest. See N.Y. City 1986-6.
Fourth, in the event the
inquirer's review of the law and the facts lead her to conclude
that she has an obligation to represent the plaintiff in a new
trial, in view of the fact that the inquiry alludes to disharmony
in the relationship with the plaintiff, the inquirer should bear
in mind that although a client has an absolute right at any time
to terminate an attorney-client relationship with or without
cause, Jacobson v. Sassower, 66 N.Y.2d 991 (1985), an attorney
may withdraw from such representation only if permissible under
the Code. See DR 2-110(B), (C), DR 5-102, DR 5-105. This is a
question of fact which the inquirer must resolve. Although the
inquiry letter does not contain any specifics regarding the
reasons for the inquirer's stated belief that her present
relationship with the plaintiff "may not be sufficiently
compatible at this time to go forward with representation,"
we caution that a refusal by a client to appeal in the face of an
attorney's advice to the contrary, without more, is not good
cause for withdrawal by the attorney. It is the client who
controls the decision whether or not to appeal and the client's
decision is binding upon an attorney even if it is not in accord
with the attorney's advice. See Hawkeye-Security Insurance Co. v.
Indemnity Insurance Co., 260 F.2d 361, 363 (10th Cir. 1958);
Matter of Estate of Sherburne, 129 Misc. 2d 56 (Surr. Ct. Queens
Co. 1985). "While the code counsels a lawyer to 'advise his
client of the possible effect of each legal alternative,' EC 7-8,
it is for the client alone to make ultimate decisions 'affecting
the merits of a cause,' provided they are made within the bounds
of the law, EC 7-7." N.Y. City 1986-6 (emphasis in
original). See also Hallock v. State of New York, 64 N.Y.2d 224,
230 (1984).
Finally, we call the inquirer's
attention to DR 2-110(A), which provides in part that:
[A] lawyer shall not withdraw from
employment until he has taken reasonable steps to avoid
foreseeable prejudice to the rights of his client, including
giving due notice to his client, allowing time for employment of
other counsel, delivering to the client all papers and property
to which the client is entitled, and complying with applicable
laws and rules.
In the event the inquirer
determines that withdrawal is mandatory or permissible, she must
comply with this Rule.
