Court issues a warning about warning clients
By Diane Karpman
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Karpman |
Everybody is raising their eyebrows
over Fletcher v. Davis (2004) 33 Cal. 4th 61. Smart lawyers are rushing
to redraft their fee agreements to be certain that their liens are valid.
Fletcher involved an oral charging
lien, or a lien placed on the prospective proceeds of a judgment/settlement,
which can be based on either an hourly or contingency fee. It was an “oral”
charging lien only because the obstinate client represented that he would sign
the fee agreement, but never did. We may have reached the point where we underestimate
our clients. Clients have common sense and know that there are no free lunches.
They know that when they receive something of value, they will have to pay for
it.
Suddenly, because of Fletcher,
lawyers must meet the stringent requirements of Rule of Professional Conduct
3-300 (Adverse Interest) to obtain a lien for work performed. Compliance requires
the client’s written consent to the “conflict,” which is caused
by the lawyer’s own interest in being paid. Making lawyers jump through
hoops to secure payment of liens for services rendered seems odd, especially
when they should get kudos for agreeing to delay receiving payment for their
services. Charging liens increase client access, benefit consumers and accommodate
the needs of economically challenged clients.
The justification for requiring
compliance with Rule 3-300 is that liens can give lawyers the ability to delay
the clients’ realization of the fruits of the recovery. Charging liens
can impair clients’ receipt of the proceeds until disputes over payment
of the liens are resolved. Anecdotally, it is clients, not lawyers, who consistently
impede lawyers from being paid. They will dispute the whole deal or the lawyers’
receipt of any portion of the recovery. This forces lawyers to maintain the
entire “disputed” portion in trust, creating a “waiting game.”
The court maintains that this is
not “unduly onerous.” Nevertheless, it represents another crack
in the fragile attorney-client relationship. Warning a client at the inception
of the relationship to consult with counsel because of a lien, and getting consent
to it in writing, does not inspire client trust. However, there is an even greater
problem occurring. If lawyers continually give clients the cautionary Rule 3-300
warning and get consents at the inception in the fee agreement, any time the
relationship changes, or if a client hiccups, then that significant language
will lose its importance. Pro forma warnings are antithetical to putting the
client on notice. Clients will become immunized to the warnings and they will
backfire on the goal of public protection.
Think about the Miranda
warning we see on television. The vast number of reported cases in which suspects
spill their guts demonstrates that the Miranda warning is not working,
or the suspects wouldn’t confess.
Fletcher seems to only apply to
prospective hourly fees. But if the reason for requiring the warnings is that
a lawyer may impede a client’s realization of the recovery, then that
same justification would apply to contingency fee agreements. So, fix all of
your fee agreements. Obviously, the writing is on the wall.
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