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Formal Opinion 1988-4

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.