The December issue of the ABA Journal features its third annual Blawg Review, which I highly recommend. But I want to address the Practice Pitfalls section of the magazine, particularly the entry by Nancy J. Geenen entitled "A Well-Crafted Engagement Letter Saves Trouble Down the Line."
In her article, Geenen writes about Jane, who signs up her first commercial client, a small technology company, and sends a letter confirming the engagement, which pertains to a joint venture. But Jane also provides advice to the company’s president, Jim, on a variety of other matters, such as employment and trade secret issues.
Jim contacts Jane when a competitor starts to raid his employees, but Jane discovers that her firm has represented the competitor so her firm can’t represent either party. It goes from bad to worse for Jane when the court rules that the noncompete provisions in the employment agreements are not enforceable — the same employment agreements about which Jane had advised Jim.
None of this sits well with Jim, who sues Jane and her firm for malpractice because she failed to advise him about new court decisions that made the noncompete provisions unenforceable.
Geenen suggests that Jane’s problems started with the vagueness of her engagement letter, which led Jim to believe that she and her firm represented his company in all matters, not just the joint venture.
She points out that Rule 1.2 of the ABA Model Rules of Professional Conduct permits a lawyer to restrict his or her representation: ‘A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent." I compared that language to West Virginia Rule of Professional Conduct 1.2, which provides at subsection (b) that "A lawyer may limit the objectives of the representation if the client consents after consultation." So unlike the Model Rule, West Virginia’s rule does not mention the reasonableness of the limitation of the representation, although it requires that the client consent to any such limitation.
The take-away is that Jane should have specified in the engagement letter that she and her firm were representing Jim’s company regarding only its joint venture, rather than "the matter we discussed," then followed up with engagement letters for any other matters in which the parties agreed that Jane would provide representation.
Although a client needs to understand clearly and unequivocally when it is and is not being represented, the burden is on the lawyer to ensure that the client understands the scope of the representation. As a lawyer, the last thing you want is a fight with your client about whether your engagement letter was sufficiently specific — because at that point, that fight is probably the least of your problems.