ABA opinion addresses client rules in engagement letters

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In Brief

• ABA Formal Opinion 523 allows certain client conduct restrictions in engagement agreements within ethical limits.
• Lawyers may restrict client recording, social media activity, and AI use to protect privilege and representation.
• Opinion warns attorneys against overreaching provisions, including limiting client complaints or forcing settlements.
• Attorneys urged to ensure clarity, necessity, and compliance with ethics rules when drafting agreements.

BOSTON — A new formal opinion from the American Bar Association Standing Committee on Ethics and Professional Responsibility addresses provisions that professional malpractice attorneys agree are increasingly creeping into lawyers’ engagement agreements with their clients, such as prohibitions on recording conversations, posting to social media, or using artificial intelligence.

But attorneys also caution that just because the ABA says lawyers can make their engagement agreements more comprehensive does not mean they always should.

Formal Opinion 523, released May 20, deals with provisions in engagement agreements that would allow a lawyer to withdraw when the client “fails substantially to fulfill an obligation regarding the lawyer’s services.”

One such obligation is obvious — to pay the lawyer for his time. But there are any number of other ground rules that lawyers may think are prudent to include in their engagement agreements, the opinion notes.

“Many law firms now include in their engagement agreements a variety of clauses addressing law firm policies for handling expenses, including e-discovery charges, as well as provisions addressing, among other things, dispute resolution, choice of law, file retention, and anticipated adjustments in lawyer hourly rates on a periodic basis,” the opinion states.

It adds that, “within ethical limits,” the engagement agreement may also set forth obligations of the client that “are not otherwise implicit.”

“For example, a lawyer may include a provision in which the client agrees not to make an audio or video recording of communications between the lawyer and client, or not to discuss the lawyer or the representation on social media during the course of the representation,” the opinion states.

The opinion highlights what lawyers should well understand is out of bounds, like making the client promise not to later pursue a disciplinary complaint or bar grievance against the attorney or law firm or forcing the client to accept a settlement recommended by the lawyer or reject a settlement that the lawyer disapproves of.

Otherwise, however, an attorney can set forth other legitimate client obligations that may form a proper basis for the lawyer’s withdrawal, the opinion notes.

“For example, although a client may ordinarily decide whether and how to communicate publicly about a legal matter, a lawyer may hold a client to an agreement not to do so without consulting the lawyer first, because the client’s public communications may frustrate effective representation or undermine the attorney-client privilege or work product protection that might attach to those communications,” the opinion states.

Some provisions may be unnecessary

Written fee agreements are an opportunity for lawyers to clearly set out the terms of the engagement right out of the gate, which only helps to better serve the client and to protect the attorney, Newton Highlands, Massachusetts, practitioner Sara N. Holden said.

“Having a written fee agreement isn’t just a box to check under Rule 1.5,” she said, adding that avoiding confusion at the start may save the lawyer from a later dispute with the client.

A growing number of attorneys are incorporating into their engagement agreements provisions addressing social media and artificial intelligence use by clients, Boston attorney John G. O’Neill confirmed.

“While this can be helpful in setting expectations, it is not a substitute for the conversation about these topics that should occur at the outset of the engagement,” he advised.

Providence, Rhode Island, attorney Christopher R. Blazejewski agreed.

“The [ABA standing] committee’s proposed client conduct provisions, such as prohibitions on recording, social media restrictions, and requirements that the client consult with the lawyer before speaking publicly, are sensible potential additions to an engagement letter that could be helpful in certain circumstances to establish baseline attorney-client expectations before any friction arises in the relationship,” he said.

But Boston attorney Susan E. Cohen said lawyers may want to consider whether such provisions are necessary in light of the nature of their practice.

As someone who defends professionals and mostly lawyers, Cohen said that in 30 years she has never had any concern that her clients were making audio recordings of their conversations.

If lawyers think that such engagement letter provisions will help with “client management,” that is fine. In that instance, Cohen recommended quoting the language from the ABA opinion directly to ensure it is accurate. However, it may be unnecessary in many instances, she added.

“If that’s not a problem in your practice area, then why are you mucking up your engagement letter with that?” Cohen asked.

She also offered a caveat: If an attorney flags “soft issues” such as making audio or video recordings or posting to social media, they should not be surprised if the client turns around and seeks to bind them to similar restrictions.

“That’s a reasonable request, so think about that strategically whether, in your type of work or your type of engagements, that helps you or hurt you,” she said.

Cohen also offered a word of caution about clauses in engagement agreements dealing with dispute resolution. It may not be enough to simply state that disputes will be “subject to arbitration” without explaining to the client what that means, including that the client is waiving their right to a jury trial and their appeal rights regarding any arbitration decision on fee claims.

Such issues do not necessarily need to be addressed in the fee agreement, but if they are, a fulsome explanation can go a long way toward establishing that the client gave informed consent, she explained.

What’s missing?

Given how big an issue it has become, Boston attorney Richard J. Rosensweig said he was surprised that the ABA’s opinion did not more directly address the issue of AI use by the client.

Boston attorney Jessica Gray Kelly agreed.

“With the uptick in the use of AI and AI recording devices, I think it makes sense to include language in the engagement letter warning the client not to use the client’s own AI tools in connection with the representation and not to record attorney-client communications, because it could result in a waiver of the privilege,” she said.

It also makes sense to state that the attorney or firm may withdraw if the client insists on using AI, Gray Kelly added.

Both she and Rosensweig noted that the basis for the provisions forbidding clients from relying on AI is to protect the client’s interest in keeping their attorney communications confidential and privileged.

“It is the client’s decision if the client wants to waive the privilege,” Rosensweig said. “The lawyer can’t stop the client if that’s what they want to do.”

However, there is no denying the way in which the waiving of privilege can undermine the lawyer’s ability to represent the client, especially by exposing “every thought that comes out of the lawyer’s head” and communications with the client to the adverse party, he added.

“It really makes it very difficult to continue to defend and prepare for a trial or a hearing, if that’s what your client’s going to do,” Rosensweig said. “And of course, most lawyers would, in the vast majority of circumstances, counsel their client not to waive the privilege.”

There are other issues that affect the ability of lawyers to do their jobs that they may want to flag as potential grounds for withdrawal in their engagement letters, Rosensweig continued, such as the consequences of the client’s failure to pay third parties, like e-discovery vendors, experts or local counsel.

“It’s not the financial obligations of a client to the lawyer directly, but it does impact the lawyer’s ability to defend the case, and it impacts the lawyer’s ability to work with service providers if they’re not getting paid,” he said.

Another concern is the client unlawfully sharing information with the lawyer, such as information that violates someone else’s intellectual property rights or communications that had been illegally intercepted.

“All the information and materials that the client gives the lawyer, once they’re in the lawyer’s possession, the lawyer is potentially at risk if those materials were obtained inappropriately,” he said.

Discretion not ‘unfettered’

The opinion also reiterates what lawyers likely already know: While the client may fire their lawyer at any time, attorneys do not enjoy the same “unfettered discretion.”

Instead, they must abide by Model Rule 1.16(a) governing mandatory withdrawal from a representation or 1.16(b) for permissible withdrawal. In crafting their engagement letters, lawyers may not expand upon those grounds for withdrawal, like attempting to authorize the lawyer to withdraw “to undertake a more lucrative engagement without regard to whether the withdrawal would have a material adverse effect on the client’s interests,” the ABA opinion notes.

A lawyer can lay out for the client what Rules 1.16(a) and 1.16(b) say about withdrawal, though even that comes with a potential pitfall, the opinion says. A lawyer needs to be careful not to mischaracterize the circumstances or way a lawyer may withdraw, for example by implying that a lawyer has the right to withdraw unilaterally, without seeking the court’s permission as required by Rule 1.16 (c).

In other words, the ABA’s opinion counsels caution, Blazejewski said.

“The opinion catalogs many ways that such language can go awry, from implying that withdrawal is automatic when it is only permissive, to omitting the lawyer’s duty to protect client interests upon withdrawal or the obligation to seek court permission in a litigation setting,” Blazejewski said. “Before going down this path, lawyers should consult with their applicable state professional conduct rules and get the language right to avoid creating a problem that would not have otherwise existed.”

According to Gray Kelly, with any provision being added to an engagement letter that may go beyond the scope of Rule 1.16(5)(b), a good rule of thumb is to ask the question: Is it to protect the client or to protect the lawyer?

“If the latter, it will likely run afoul of Rule 1.6(5)(b) and Formal Opinion 523,” she said.

In drafting additional provisions to include in engagement agreements, lawyers should carefully review the relevant rules and ensure that any proposed additions are consistent with the language, requirements, and any limitations or prohibitions contained in the rules, Holden counseled.

She used the example of Rule 1.16, which allows a lawyer to seek withdrawal if “good cause” exists but does not specifically define what constitutes “good cause.”

“So, if a fee agreement contains a provision whereby the lawyer seeks the client’s advance consent that if the client fails to take a certain action that it shall be ‘good cause’ to withdraw, that provision may, in fact, be inconsistent with Rule 1.16 and misleading to the client,” she said.

If the attorney is unsure, they should err on the side of caution and seek the advice of ethics counsel, Holden recommended.