Sunday, August 21, 2016

Clients Canceled or Curtailed (Closing Can Cause Consternation)



Two partners from Dentons weigh in on the theme of closing matters and disengaging from client relationships with: "Don't Wait for the New Year to Close Old Files" --
  • "The formal termination of an attorney-client relationship through a file closing can be an important aspect of risk management for many reasons. For one thing, it has significant positive implications for the ethical, legal, and professional obligations of an attorney and the law practice. Once the attorney-client relationship ends, clients move from being existing clients of the attorney and the firm to being former clients. This is a significant distinction for conflict of interest purposes, as the ethics rules governing existing clients are different from those governing former clients."
  • "Generally, if a new matter involves an existing client, the conflict of interest rules may require the attorney to obtain informed written consent of each client before accepting representation of more than one client in a matter in which the interests of the clients potentially or actually conflict. If the client interests actually conflict, the attorney may have to decline the representation to avoid violating the duty of loyalty."
  • "On the other hand, the conflict rules for former clients are less onerous. The critical test for a new representation involving a former client—as opposed to an existing client—is whether the new matter is substantially related to the representation of the former client. If not, nothing further usually needs to be done."
  • "Generally, effective file closings involve three parts: a file closing letter; an accounting of all funds received; and an administrative closing of the matter. The combination of all three parts provides the most protection, although each firm can review to identify the best course for its practice."
  • "Regardless of the reason, when the representation ends, the attorney or law firm should consider sending a file closing letter confirming the end of the attorney-client relationship and, as a result, any ongoing duty to the client for that particular matter. This is true even for clients for whom the attorney or law practice does other work; a closing letter for a particular closed matter even if other matters are ongoing is important for risk management purposes. Indeed, effective audits of law firms randomly check closed files to see if file closing letters are in the files."
And an update highlighting the important of clear communication: "Locke Lord Atty's Cold Shoulder To Client An Ethics Breach" --
  • "A Locke Lord LLP partner likely broke ethics rules when he chose not to tell a longtime client why he was severing the relationship, experts said Monday, even though a federal judge found that a conflict revealed late in a trademark case didn't justify Locke's disqualification."
  • "While there is scant ethical guidance on specific obligations to explain to a client why a representation must end, lawyers' overarching duty to give clients all information relevant to their case calls for a complete explanation when an adversity is spotted and precipitates the breakup."
  • "In a harsh critique of Locke Lord litigator Roy Hardin and the firm’s “gross negligence” in premerger conflict checks, U.S. District Judge Jed Rakoff nevertheless concluded in a Friday order that previous ethical mishaps didn't mean Victorinox AG should lose their chosen counsel."
  • "But legal conflicts expert William Freivogel said that decision was likely based on a desire to spare the Swiss Army knife maker the disqualification rather than the firm’s handling of the conflict itself."
  • "That termination letter was “misleading on its face” because Hardin acknowledged in later testimony that the conflict was the real trigger for his December breakup with B&F, Judge Rakoff said. “The letter, however, contains nothing that would alert B&F to any conflict,” the opinion said."
  • "Legal ethics expert Geri Krauss of Krauss PLLC said that despite the seriousness of the conflict issue, the court’s decision to deny the disqualification was unsurprising at such a late stage of the litigation... A lawyer also has a duty to keep clients informed on any issue that might affect them, including a decision to cease representation due to a conflict or a mistake in the lawyer’s work, she said."

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