When are lawyers barred from dropping clients because of 'materially adverse' effect? ABA ethics opinion addresses issue
A lawyer’s motivation for ending a client representation is not relevant when assessing whether the ABA Model Rules of Professional Conduct bar the withdrawal because of a “materially adverse” impact, but three other factors matter, according to an ABA ethics opinion released Wednesday.
Formal Opinion 516 addresses Rule 1.16(b)(1) of the ABA Model Rules, which provides that a lawyer can voluntarily end or seek to end an ongoing representation if “withdrawal can be accomplished without material adverse effect on the interests of the client.”
Ordinarily, lawyers can decline to accept a representation for any reason, including “a gut feeling that things will not work out,” according to the April 2 opinion by the ABA Standing Committee on Ethics and Professional Responsibility. But ethics rules limit a lawyer’s ability to withdraw.
“Simply put,” the opinion said, “getting out of a matter can be a lot harder than getting in.”
According to the ethics opinion, a withdrawal is materially adverse if it:
• Would significantly impede the progress of the client’s matter.
• Would significantly increase the cost of the matter.
• Would significantly harm the client’s ability to achieve the legal objectives that the lawyer had agreed to pursue.
Circumstances in which withdrawal would not be materially adverse, the opinion said, include withdrawing when the representation “has barely gotten off the ground,” when co-counsel can successfully complete the remaining work, and when there is no ongoing matter.
“As these scenarios illustrate,” the opinion said, “Rule 1.16(b)(1) does not: protect a client’s interest simply in maintaining an ongoing client-lawyer relationship, protect against the client’s disappointment in losing the lawyer’s services, or prohibit withdrawal based on the client’s perception that the lawyer is acting disloyally by ending the representation.”
Client consent to a withdrawal is preferable but not required. In general, subject to confidentiality duties to others, a lawyer owes an explanation for withdrawing “but not an explanation that necessarily satisfies the client or convinces the client that it is best to retain a different lawyer,” the opinion said.
If there is a materially adverse impact in ending the representation, lawyers may be able “to remediate these adverse effects and withdraw in a manner that avoids or mitigates the harm,” the opinion said.
Examples of how lawyers could remediate the impact include helping the client find a new lawyer, collaborating with successor counsel “to bring the new lawyer up to speed,” and returning or foregoing legal fees for work that will have to be duplicated.
The lawyer’s reason for withdrawal under Rule 1.16(b)(1) is irrelevant, the opinion adds, even if that reason is perceived as disloyal.
“In general, although a lawyer may not advocate for a party that is directly adverse to another current client without both clients’ informed consent, a lawyer may advocate against a former client if the matter is unrelated to the former representation and the lawyer does not use or reveal information relating to the representation to the disadvantage of the former client,” the opinion said.
The opinion notes a judicially developed “hot potato” principle, in which some courts have held that a lawyer can’t withdraw from a representation to litigate against that now-former client, even in unrelated matters. But that principle stems from a common law duty of loyalty, rather than the ABA model rules, the opinion said.
“The salient question under Rule 1.16(b)(1),” the opinion said, “is whether, by withdrawing from a representation, the lawyer will materially adversely affect the client’s interests in the matter in which the lawyer represented the client, not whether the lawyer will be adverse to the client in an unrelated matter after the representation is over.”
The ethics opinion dealt with voluntary withdrawal from a representation. Lawyers are required to end a representation under a different section of Rule 1.16.
Withdrawal is required if continuing the representation would violate an ethics rule or other law, if the lawyer’s ability to represent the client is materially impaired by a physical or mental condition, if the lawyer is fired, or if the client seeks to use the lawyer’s services to commit or further a crime or fraud.
A dissent argues that the ethics opinion is incomplete, partly because it “fails to address the breadth of precedent on the ‘hot potato’ doctrine.” More specifically, the dissent says, the majority opinion “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.”
Nor does the opinion “meaningfully address” hot potato situations in transactional matters, including when a law firm ends representation of a business client to represent a different client in an adverse transaction or other matter that does not involve litigation, the dissent says.
The dissent also expresses concern that the opinion “will only make it more difficult to convince lawyers to close files and transform current clients into former clients when they have completed their work on a matter.” Practical guidance could help lawyers “understand the importance of actually terminating and closing files for dormant clients in order to limit ethical duties and conflict scenarios.”
The dissent was issued by two out of 10 members of the Standing Committee on Ethics and Professional Responsibility.
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