Opinion #68. Obtaining Release of Claims of Present and Future Professional Misconduct

Issued by the Professional Ethics Commission

Date Issued: March 14, 1986

Pursuant to M. Bar R. 11(c)(1), both Bar Counsel and the Grievance Commission have requested an advisory opinion from the Professional Ethics Commission with respect to the following fact pattern:

Client C retains the services of law firm XYZ for the specific purpose of handling certain financial negotiations with Bank B on behalf of C. The written agreement between C and XYZ with respect to this representation specifically indicates the hourly rate for such services, as well as C’s obligation to pay an initial retainer of $1,000. C made payment of the retainer, and XYZ commenced its representation of C by contacting B.

Subsequent to this initial work performed by XYZ, it was determined that the firm had an apparent conflict of interest, and was no longer able to represent C, regarding any claim against B.

Prior to ending XYZ’s representation of C with respect to matters involving B, XYZ had represented C on certain collection matters, unrelated to B or the conflict. It was agreed, that despite XYZ’s withdrawal from representation of C concerning B, that XYZ would continue to represent C on the collection matters. When C was advised by XYZ of its inability to represent him reference B, C demanded the return of his entire $1,000 retainer. XYZ then indicated that portions of the retainer were to be applied toward services and expenses regarding the defense of the unrelated collection claims, and returned to C the retainer less the amount attributable to such claims. Later, however, XYZ returned the balance of the retainer, upon C’s execution of a release of XYZ from any and all actual or threatened claims of ethical misconduct, professional negligence, economic harm, physical injury or emotional distress.

Questions Presented

  1. Given the specific language of the fee agreement, is XYZ authorized to retain portions thereof for other unrelated matters, or are they required to return all of the retainer to C?

  2. Was the release from professional negligence authorized pursuant to M. Bar R. 3.6(b)(2)?

  3. In any event, notwithstanding the answers to questions 1 and 2 above, is a release from any present or future claims of ethical misconduct appropriate pursuant to the Maine Bar Rules?

Opinion

  1. Return of Retainer. Maine Bar Rule 3.5(a)(3) provides, inter alia, that “a lawyer who withdraws from employment shall refund promptly any part of a fee paid in advance that has not been earned.” By virtue of Rule 3.5 (a)(3), the critical question here is whether the portion of the initial retainer fee which was not refunded to the client had been “earned” by the firm. If the initial retainer fee was paid to the firm for the specific purpose of the firm’s representation of the client in the subject matter of representation from which the firm later withdrew from representation, it is the opinion of the Commission that under Rule 3.5(a)(3) no part of that initial retainer fee could be said to have been “earned” by the firm’s representation of the client in other matters which were unrelated to the subject matter for which the initial retainer was paid.

  2. Release from Professional Negligence. Maine Bar Rule 3.6(b) provides:

(b) Limiting Liability. A lawyer shall not attempt to exonerate himself from, or limit, his liability to his client for his personal malpractice or that of his partners or salaried employees. This rule shall not prevent a lawyer from settling or defending a malpractice claim.

To the extent that the release in question purports to release the firm from malpractice claims that might arise in connection with the firm’s future representation of the client, the release would be prohibited by the first sentence of Rule 3.6(b).

To the extent that the release purports to release the firm from malpractice claims that might have existed as of the date of the release, the release would be permissible only if it could be considered to constitute the “settlement” of a malpractice claim under the second sentence of Rule 3.6(b).

Since the settlement of a malpractice claim with a client constitutes a “business transaction” with a client within the meaning of Rule 3.6(i)(2), the requirements of Rule 3.6(i)(1), which are made applicable to such a transaction by virtue of Rule 3.6(i)(2), must be read into the “settlement” provision of the second sentence of Rule 3.6(b). Construing the “settlement” provision of the second sentence of Rule 3.6(b) in conjunction with Rule 3.6(i)(1) and (2), the Commission concludes that a lawyer’s settlement and acceptance of a release of his client’s malpractice claim against him is not permissible unless, consistent with Rule 3.6(i)(1) and (2), the release and settlement are fair and reasonable to the client and are fully disclosed and transmitted to the client in manner and terms which should have reasonably been understood by the client; the client is advised and given a reasonable opportunity to seek independent professional advice of counsel of the client’s choice regarding the settlement and release; and the client consents in writing to the settlement and release.[1] One member of the Commission believes that the settlement of a malpractice claim with a client is not a “business transaction” within the meaning of Rule 3.6(i)(2) and is therefore not subject to the restrictions imposed by the opinion.

  1. Release from Present and Future Claims of Ethical Misconduct. It is the opinion of the Commission that a client’s release of a lawyer from past or future claims of ethical misconduct is both ineffectual and prohibited by virtue of Maine Bar Rule 3.2(f)(1), which provides that “[a] lawyer shall not (1) directly or indirectly . . . circumvent, or subvert any provision of the Maine Bar Rules.” It would therefore be improper for a lawyer to request or to accept a client’s release of present or future claims of ethical misconduct. See Ethics Commission Opinion No. 66.

Footnote

[1] The Commission notes that the release in any event may be ineffectual because of lack of consideration if the only consideration for the release was the refund to the client of the initial retainer fee. Assuming the facts to be as discussed in part (1) above, the client would have been entitled to that refund as a matter of right.


Enduring Ethics Opinion