Do You Really Write Engagement Letters?
Scope of Representationby Jett Hanna
Most lawyers by now have heard the advice to write engagement letters. Unfortunately, there is often a misunderstanding about what constitutes a good engagement letter that can protect you against potential malpractice claims. Writings that are only fee agreements or status reports are not effective engagement letters. Here are the elements of a good engagement letter.
Tell who is (and is not) the client. When you represent an entity, you cannot speak to the entity. You must speak to an individual who may believe you also represent them individually. Similarly, when you meet with several people about representation, you may intend to represent only one of the group, such as one spouse when both meet with you. Nailing down who you do (and do not) represent is a critical step to avoid misunderstandings.
Scope of representation. To the extent possible, it is critical to specify the work which you will, and will not, do. Misunderstandings about the work to be performed are frequently the basis for malpractice claims. For example, you may have done great work creating a business structure, only to find out later that the client expected you to advise them on tax advice as well. If someone like an accountant or engineer will be providing services vital to the client’s ultimate goal in the representation, make clear that you will not be providing those services.
In many types of representation, it makes sense to describe the course you expect the representation to take. In litigation, describing the pleading, discovery, and trial phases and time frames may help the client understand the process better and avoid surprises. In transactions, explaining due diligence checks and negotiation that might be appropriate can be useful.
In some cases the full scope of the representation necessary may not be absolutely clear until you investigate or research a bit further. Do not hesitate to update your engagement letter as the scope of representation changes, including situations where you take on, or need to farm out, new tasks related to the representation. Describing exactly what you will do and sticking to it can avoid a claim that you were acting as general counsel to the client.
Client duties. Your client’s cooperation in the representation is critical to success. If your client will have significant duties such as providing you with evidence or documentation, include the client’s duties in your engagement letter. If the client later fails to work with you, the fact that you stressed the importance of their cooperation from the start will help you show it was the client’s neglect, and not yours, that the representation did not meet the client’s expectation.
Include fees and billing practices. Besides making collection of fees easier, spelling out fees in writing at the outset of litigation makes it less likely that your client will be surprised by the ultimate cost of the representation. In some cases, fee agreements must be in writing, such as contingent fees under Texas Rule 1.04(d). Letting the client know about the overall cost of representation that you anticipate, as well as updating as appropriate, can also avoid surprises that spur malpractice claims.
Conflict disclosure and consent. While this may be a separate writing, and might be necessary at any phase of representation, it is often important at the outset of representation to obtain disclosure and consent to conflicts. Disclosure and consent can be included in an engagement letter.
Confidentiality. It makes sense to inform the client about attorney-client confidentiality and that he or she should not discuss the case with others without discussing such contact with you first. When representing multiple clients, make sure you tell them you will share confidences that affect the representation among the clients. Let them know that you may have to withdraw if you receive confidential information that creates a conflict that prevents you from adequately representing all parties.
Warn about security of email. One important aspect of confidentiality is assuring that the communication method with the client is secure. Employers may monitor email on work computers, and computers sometimes have multiple users who can access the same email account. If you intend to communicate with a client by email, tell the client that you cannot guarantee the security of email communications, and to allow the client to opt out of using email.
Describe your file retention/destruction policy. If you have a file retention or destruction policy, informing your client at the outset and conclusion of representation and at the conclusion will help you avoid a claim that you destroyed information you had in your possession.
Countersignature. Ideally your client should read and sign the engagement letter to assure that they have read it. Some lawyers send engagement letters by certified mail to show that clients at least received the letter.
Follow up with other documentation as necessary. As you deal with unrepresented parties, you may need to document that you do not represent them. When you decline representation, document that by a letter as well.
Act according to the letter. Make sure you only give advice to your intended client. Under Texas law, a lawyer may be liable to a non-client for negligent advice if the non-client reasonably believes that he or she is a client. Do not perform services you have not agreed in writing to perform.
