Written Fee Agreements
It is important to communicate in writing with a client immediately after the initial consultation to define your professional relationship. Clearly defining whether or not you are acting on behalf of the client will help avoid any misunderstandings about the timing, scope, and cost of your legal representation. Misunderstandings about the lawyer–client relationship often lead to the souring of the relationship, and costly collection and malpractice suits.

If you are going to represent the client, send the client an engagement letter or, as suggested here, a written fee agreement. The term "engagement letter" is often, but not always, a unilateral written communication from the lawyer to the client setting forth the lawyer’s understanding of the work to be done on behalf of the client. A written fee agreement is very similar, except that it is a bilateral contract between you and your client that will define the basis of your relationship and help both parties make it a positive experience. In noncontingency cases, written fee agreements are not required by the District of Columbia Rules of Professional Conduct. However, from a management perspective, they are essential.

From a proper management perspective, you should have a fee agreement with every client. A well-written fee agreement encompasses more than your hourly, flat, or contingent fee; it should define the parameters of the work to be completed, and address your obligations to the client, and the client’s obligations to you. It should also address your rights (e.g., to seek withdrawal) and your client’s rights (e.g., to terminate representation). This is discussed in more detail below. First, the minimum requirements:

Rule 1.5(b) of the D.C. Rules of Professional Conduct states that "[w]hen the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, in writing, before or within a reasonable time after commencing the representation." See also Comment [1] to Rule 1.5.

Although Rule 1.5 may only require a written rate disclosure, a comprehensive agreement can avoid misunderstandings that a simple hourly rate disclosure will be inadequate to prevent. Therefore, it is strongly recommended that a lawyer draft a comprehensive fee agreement to be signed by the lawyer and his or her client at the start of each representation.

Be clear in the language you choose. Avoid legalese. Use common language that is clear to your clients. Remember, because you are the person drafting this document, it is possible that any error or ambiguity may be resolved against you if a fee dispute later arises. A comprehensive written fee agreement should address the following issues:

1. Define the scope of your services: Expressly state in the agreement the legal matter in which you are representing the client. Be specific. If the matter is a DWI case in D.C. Superior Court, write that in the agreement. If your representation will not include any potential appeal, state that as well. If your client hires you in a more general role of counselor, write it down, along with the parameters of your counseling role. If an associate or paralegal will work on the case, put in the agreement that the firm has the authority to assign other attorneys or staff in the firm to work on the matter. Make sure you and the client agree on this definition of your services. Resist the temptation to guarantee any results to the client, beyond giving the matter your best legal effort.
2. Define the timing of your services: Make your services contingent on cooperation and payment from the client. If you want payment before commencing work, clearly state to the client that your services start after the client has paid the advance or the flat fee. State that your services may cease if the client fails or ceases to pay your bill. If you later decide to terminate representation of your client for nonpayment of fees, be sure you are in compliance with any and all court rules and procedures, including seeking leave to withdraw if such leave is required. See also Rule 1.16(d) about steps to follow whenever a representation is terminated.
3. Explain the fee arrangement: For your client’s edification, explain the type of fee arrangement you are using. If it is a flat fee, expressly state that your fee is a one-time, upfront payment before services begin. For an advance fee, explain in the agreement that you will be charging your services against the advance fee on an hourly basis, and write in that hourly amount. Let the client know that when the advance fee is exhausted, you will require more money. By the same token, explain that you will return any unused portion of the advance fee (pursuant to Rule 1.16). When a fee is contingent on the outcome of a matter, Rule 1.5(c) requires that the fee agreement: (1) "shall be in writing," (2) "shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation, and other expenses to be deducted from the recovery," and (3) shall state "whether such expenses are to be deducted before or after the contingent fee is calculated."
4. State how fee advances and costs will be handled: Rule 1.15(d) now states that advances of unearned fees and unincurred costs shall be treated as property of the client unless the client consents to a different arrangement. Therefore, advanced fees and costs must be placed into your client trust account rather than your operating account—unless your client agrees otherwise. State in your agreement where the fee and/or cost advance will be placed. If it is to be placed in your client trust account, state when the fee will be withdrawn. For example, you may want to state that once each month (e.g., the X day of each month or the first Friday of the month, etc.) you will move the client’s funds from your trust account into your operating account to pay for the fees and costs incurred on behalf of the client during the prior month. You may also want to state that you will return any unearned fees and include a clause about how you will bill the client when the advanced fee is exhausted.
5. State examples of the services to be billed to the client: For your clients who are billed on an hourly rate basis, explain that they will be billed for your time on all aspects of the case, and cite several types of billable services, such as depositions, telephone calls, drafting correspondence, pleadings, trial preparation, etc. State the amount of your minimum time increment: one-tenth of an hour, one-quarter of an hour, etc. Clients will appreciate knowing these details in advance, and such disclosure will save you numerous headaches over time.
6. Explain the client’s obligation for costs: There are two types of costs usually billed to the client: costs incurred in your office, such as copying charges, postage fees, long-distance telephone charges, etc., and costs billed by outside vendors, such as court filing fees, messenger services, and process fees. Some lawyers pay all costs and pass them along in their bills to the clients; other lawyers charge clients for the in-office costs, and have the clients directly pay the costs incurred by outside entities; still other lawyers require funds in advance from clients to pay for costs incurred during the course of the matter. Decide how you want to bill your client for costs and so state in the agreement. (Note: Disbursements to outside vendors cannot be "marked up" before being billed to the client, e.g., a copying job sent to a copying company at .05 a page cannot be billed to your client at .10 a page. D.C. Bar Legal Ethics Comm. Op. 185.)
7. Explain your billing practices: Let your client know how often he or she can expect to receive your bill (preferably monthly), then make sure you stick to the promised schedule. Also explain when payment is due (upon receipt; within 30 days, etc.). You can charge interest on the unpaid balance as long as you disclose the terms in your written fee agreement with the client, and follow all applicable laws as set forth in D.C. Bar Legal Ethics Committee Opinions 75 and 60.
8. Allow your client time to question your bill: Discussing your bill with your client will ease client concerns when the bill starts to mount. Let your client know in the fee agreement that he or she may discuss the bill with you at any time. However, put a time limit on the ability to question specific charges—say, within 30 days of receipt. This may save you problems with a client who later decides to question all charges and not pay the bill.
9. State use of fee arbitration: More and more lawyers and clients are using arbitration to resolve fee disputes. Many of them are using the services of the D.C. Bar Attorney/Client Arbitration Board (ACAB) for final and binding arbitration. In the District of Columbia it is permissible to include in a fee agreement a requirement that any fee dispute between you and your client be submitted to the ACAB, "provided that the client is advised in writing of the availability of counseling by the staff of the ACAB and provided the client consents in writing to the mandatory arbitration." D.C. Bar Legal Ethics Comm. Op. 218 (It is important to read the entire opinion before drafting your arbitration provision.)
10. Plan ahead for returning the client’s file: D.C. Bar Legal Ethics Committee Opinion 283 states that a lawyer must keep client files for a minimum of five years, unless the client requests that he or she take possession of the file. (Remember, the file in your office is really the client’s file.) Locating a client after five years to return the file or seek permission to destroy or discard it is a time-consuming and often impossible task. Consider adding a clause to your written fee agreement that allows you to destroy or discard the client’s file after five years unless the client requests it before the expiration of this time. (It may be prudent to keep the file longer than five years, depending upon your type of practice.) In any event, all valuables must be returned to the client or other proper party before the file can be destroyed or discarded. See Opinion 283 for additional guidance.
11. Be sure to include space for you and your client to sign the document, and to acknowledge the terms of your new relationship: You should give the client time to read the agreement and ask questions before signing the document. Many lawyers mail the fee agreement to the client after their first meeting so that the client has time to review it independently. Once the agreement is signed, give your client a signed copy as soon as possible so that the client can refer to it if any questions arise during the representation.

Nonengagement Letters
If you have met with an individual and decline to represent him or her, you should send a nonengagement letter to that person. The nonengagement letter helps to avoid malpractice and disciplinary problems raised in situations such as the following example: A person consults with you and you orally decline the case at the consultation, but the person later claims and believes (after the statute of limitations has run) that you are his or her attorney. You have no written record of your declination of the case. A nonengagement letter sent to the client would help to avoid this growing type of malpractice claim. You should consider the following elements when drafting your own nonengagement letters:

1. Devise a clear statement that you are not accepting the individual’s case. Avoid using legal jargon that may be misconstrued by the would-be client. Be understandable and concise that you will not be representing the person in this legal matter.
2. Present your reasons for declining the client’s case. Although you need not disclose your reasons, you may want to so you do not lose the person as a future source of business. For example, you may inform the client that you do not practice that area of law, or it may be more complex than you have resources to handle at the present time. In either case you must be truthful, but again, you need not disclose your reasons.
3. Avoid commenting on the merits of the client’s matter. This is especially true if you are unfamiliar with the law and the legal issues presented by the client. Your opinion as to the merits of the case might influence the client’s diligence in obtaining other counsel. Unless you were hired to research and investigate the issues, you might even include a statement that declining the case is not an opinion of the merits.
4. Avoid giving specifics on time limitations, but it is acceptable to state that time limitations may exist. Encourage the client to seek other counsel as soon as possible so as not to jeopardize his or her rights or responsibilities.
5. Send the letter to the client by certified mail or other delivery method that you believe is appropriate. Put a copy of the letter in the person’s file, and keep it until your risk of a malpractice or disciplinary claim is past. If the nonengagement letter comes back to you as undeliverable, take notes of your efforts to locate the client, and attempt to send the letter again. Keep these notes in the file.

This informational checklist on engagement/nonengagement letters is provided as a service of the D.C. Bar Practice Management Advisory Service. It is not endorsed by the D.C. Bar Board of Governors. Please consult the D.C. Rules of Professional Conduct when drafting your letters and/or agreements.