Quandaries & Quagmires: Considerations for vetting and firing clients

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The ABA has recently given attention to the subjects of vetting clients (prospective and existing) and terminating client representations. In 2023, the ABA amended Model Rule of Professional Conduct 1.16(a), to require vetting of prospective and ongoing clients. In April 2025, the ABA issued Formal Opinion 516, addressing when a lawyer may withdraw “without material adverse effect on the interests of the client.” Rule 1.16(b)(1). Although Minnesota has not adopted the vetting amendment and has not expressly addressed Op. 516, these subjects are important for Minnesota lawyers.

Vetting. Model Rule 1.16(a)(1) requires lawyers to “inquire into and assess the facts and circumstances of each representation [of a client] to determine whether the lawyer may accept or continue the representation.” An analysis of this amendment identified serious problems with the ABA vetting rule.¹

Although no one has proposed adopting Model Rule 1.16(a)(1) in Minnesota, Minnesota lawyers should regard prospective client vetting as essential for effective loss prevention. Malpractice insurers counsel their insureds that unsuitable clients are a major source of claims and losses. Clients may be unsuitable in various ways. For example, they may be (a) dishonest or reckless; or (b) organizational clients whose structures are unstable; or (c) incapable of dealing with the challenges presented by the representation; or (d) unable or unwilling to pay fees; or (e) joint clients whose current harmony is limited or fragile.

A law firm should carefully consider whether a prospective client is unsuitable. A law firm of any size should have a procedure, such as a New Business Committee, by which new clients are vetted by someone in addition to the originating lawyer in the most risk-prone types of matters — such as client fund-raising, contingent fee cases, and joint representations.

For a most unsuitable client, an ethics rule gives surprising discretion: “[A] lawyer may withdraw from representing a client if: . . . (2) the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent.” Rule 1.16(b)(2). The ABA declined — inexplicably — to amend “may withdraw” to “must withdraw,” but prudence is more demanding than the rule. If a client insists on engaging in apparently serious misconduct, a lawyer with any sense of self-preservation should terminate the representation ASAP.

Terminating representations for “other good cause.” Rule 1.16(b) lists seven reasons for which a lawyer “may” withdraw from representation, e.g. nonpayment of fees, repugnant actions by the client, fundamental disagreement.

The broadest of these permissions is withdrawal for “other good cause.” Rule 1.16(b)(7).² Good cause includes breakdown of the attorney-client relationship, for example when a client was “loud, angry, and disrespectful.” However, the timing of withdrawal is an important factor in determining good cause, e.g. withdrawal on the eve of trial would require a very material cause.³

When is the “good cause standard” not satisfied? The client’s refusal to accept a settlement offer in a contingent fee matter is not good cause for withdrawal.⁴ For some decades, the “hot potato” rule held that dropping a client to avoid conflicts in suing that client was not “other good cause.” As one court memorably put it, “A client should not wake up one morning to discover that his lawyer, whom he had trusted to protect his legal affairs, has sued him — even if the suit is utterly unrelated to any of the work the lawyer had ever done for his client.”⁵ Many “hot potato” cases involved disqualification orders in civil proceedings, but the doctrine has also been used for disciplinary purposes.⁶

Terminating attorney-client relationships. Rule 1.16 involves terminating “representations,” not terminating attorney-client relationships. Law firms have sometimes been disqualified from appearing adverse to a party for whom they have provided services periodically, even though they are not services currently being provided. The basis for disqualification has been that there is an ongoing attorney-client relationship. Rule 1.16 does not restrict a lawyer from terminating a relationship where there are no incomplete representations. In the author’s opinion, a lawyer may terminate such a relationship for the purpose of taking on a new representation that is directly adverse to the client in the relationship. This may be called “the cold potato corollary” to ”the hot potato doctrine.”

Op. 516 and “without material adverse effect.” In 2005, Minnesota adopted Model Rule 1.16(b)(1), “[A] lawyer may withdraw from representing a client if: (1) withdrawal can be accomplished without material adverse effect on the interests of the client.” In Minnesota, the rule has not produced controversy, but it became controversial nationally in 2025, when the ABA issued Formal Opinion 516, “Terminating a Client Representation Under MRPC 1.16(b)(1): What ‘Material Adverse Effects’ Prevent Permissive Withdrawal?”

According to one Office of Lawyers Professional Responsibility (OLPR) article, even before Minnesota adopted the “without material adverse effect rule,” Minnesota lawyers could withdraw “for any good reason (there may be some legal bad reasons) or for no reason at all.”⁷

Another OLPR article, applying Rule 1.16(b)(1), opined that a lawyer could resolve to “withdraw from the case that I just don’t have the time, the competency or the inspiration to handle … if withdrawal can be accomplished without material adverse effect on the interests of the client.”⁸

ABA Opinion 516 provides guidance on how to determine whether a withdrawal will cause “material adverse effect.” “The opinion concludes that a material adverse effect is one which, despite a lawyer’s efforts to remediate negative consequences, will significantly impede the forward progress of the matter, significantly increase the cost of the matter and/or significantly jeopardize the client’s ability to accomplish the objectives of the representation. In other words, the material adverse effect must relate to the client’s interests in the matter in which the lawyer represents the client.”

On the other hand, factors that often support a conclusion of no material adverse effect include withdrawal when the representation has barely begun, no work is to be done soon, or there is co-counsel.

Opinion 516 rejects the argument that loyalty precludes withdrawal without good cause. The opinion reasons, “In general, to the extent that the Model rules proscribe disloyalty, they do so because of the expectation that a lawyer’s disloyalty will adversely affect the quality of the lawyer’s work.” Some might well argue that, on the contrary, loyalty is an independent and important value.

Even where there might be a material adverse effect if the lawyer withdrew, withdrawal is permissible, according to Op. 516, if the effect can be eliminated or rendered non-material by various ameliorative measures, e.g. reducing or forgoing fees, or bringing successor counsel up to speed.

Opinion 516 also states, “The lawyer’s motivation for withdrawal is not relevant under Model Rule 1.16(b)(1). Therefore, under the Model Rules, if the lawyer’s withdrawal does not cause “material adverse effect” to the client’s interests in the matter in which the lawyer represents the client, a lawyer may withdraw to be able to accept the representation of a different client, including to avoid the conflict of interest that might otherwise result.” Op. 516 thereby appears to reject the traditional “hot potato” doctrine.

Dissent. Dissents by members of the ABA Standing Committee on Ethics and Professional Responsibility are rare, but two committee members joined in a dissent to Op. 516. The dissent argues that the opinion does not do justice to the “hot potato” doctrine. Lawyers may be misled into thinking “hot potato” is dead as a disqualification doctrine. The dissent also argues that the opinion is “incomplete” because it does not offer guidance on related subjects, e.g. the importance of closing files and duties of mandatory withdrawal.

Most importantly, the dissent criticizes the opinion because “it does not directly answer whether terminating a client for the purpose of turning around and filing suit against it for another client could itself qualify as an act inflicting a material adverse effect on the interests of the client being dropped…” Indeed, Opinion 516 itself states, “[e]ven where a lawyer would otherwise be permitted to end a representation … courts might consider it disloyal for the lawyer to withdraw for the purpose of advocating against the now-former client even in an unrelated matter.”

The dissent has a point here — Op. 516 could be clearer about whether it is opining that a lawyer does not violate Rule 1.16(b)(1) when, for example, the lawyer withdraws from representing client a few days after signing an engagement letter, but before performing any services, and the withdrawal is motivated and followed by the lawyer’s representation of B in a suit against A. Put differently, Op. 516 could have expressly stated that the subsequent adversity is not itself a “material adverse effect.”

May a lawyer withdraw from representing client A, where the withdrawal will not cause material adverse effect, in order to avoid the conflict the lawyer would have in undertaking a new representation, of Client B, in a business deal that does not involve A’s confidential information? Op. 516 appears to give an affirmative answer.

A textual argument. Rule 1.16(b)(7) permits withdrawal for “other good cause.” “Other” implies that the withdrawal permissions in Rule 1.16(b)(1)-(6) are all types of “good cause.” In disqualification and discipline cases involving the hot potato doctrine, the conclusion has typically been that the motive to represent a more desirable client against a now-current client is not “other good cause.”

It may be argued that no other good cause is needed where the withdrawal meets any of the independent standards under Rule 1.6(b)(1)-(6). If, for example, client A has not paid a required initial retainer after signing an engagement letter, A’s lawyer may withdraw and, arguably, then represent B against A. Similarly, where withdrawal from representing A may be accomplished without material adverse effect, the withdrawing lawyer arguably has good cause for withdrawal, and does not need other good cause to sue A after withdrawal. Whether such arguments will succeed in disqualification motions remains to be seen, but the arguments should succeed in discipline defense.

Further reference. This article does not address Minnesota Rule 1.16(e), (f), and (g). These provisions are not found in Model Rule 1.16, but they are the subject of numerous disciplines. They were adopted largely to specify the requirement that on termination of representation a lawyer must surrender “papers and property to which the client is entitled.” Model R. Prof ‘l Conduct 1.16(d). Practical pointers on when and how to withdraw from representing a client, are available in a two-part article by Eric Cooperstein, a leading Minnesota ethics lawyer.⁹

William J. Wernz is the author of the online treatise, “Minnesota Legal Ethics.” He has been a member of the Board on Judicial Standards, and he has served as Dorsey & Whitney’s ethics partner and as director of the Office of Lawyers Professional Responsibility.

Notes

1. William J. Wernz, The Lawyer as Private Investigator: Parsing New ABA Model Rule 1.16(a) – Inquiring Intro and Assessing Representations, Bench & B. of Minn., Oct. 1, 2023.
2. This permission has been in effect for well over a century. ABA Canons of Professional Ethics 44 (1908).
3. In re 94-24, 533 N.W.2d 852, 852 (Minn. 1995) (Reversing admonition).
4. In re Petition for Distribution of Attorney’s Fees Between Stowman Law Firm, P.A., and Lori Peterson Law Firm, 870 N.W.2d 755, 765 (Minn. 2015)
5. SWS Fin. Fund A v. Salomon Bros. Inc., 790 F.Supp. 1392, 1401 (N.D. Ill.1992).
6. Marcia A. Johnson, Summary of Admonitions 1994, Bench & B. of Minn., Mar. 1995; Martin A. Cole, When Does a Current Client Become a Former Client?, Minn. Law., Mar. 1, 2004.
7. Martin A. Cole, At Odds With Your Client, Bench & B. of Minn., Sept. 1997. https://lprb.mncourts.gov/articles/Articles/At%20Odds%20With%20Your%20Client.pdf
8. Craig D. Klausing, Three New Year’s Resolutions to Make—and Keep, Minn. Law., Jan. 5, 2009.
9. Eric Cooperstein, Figuring Out How and When to Withdraw from Representing a Client, Henn. Law., March 18, 2022; How to Draft a Withdrawal Letter, Henn. Law., March 25, 2022.