Hello everyone and welcome to this Ethics Alert blog which will discuss the recent opinion of the Eighth Circuit Court of Appeals reversing a trial court order and permitting a law firm to withdraw because of the client’s failure to pay the firm’s fees and to provide the firm with information “critical for its defense.” The case is Sanford v. Maid-Rite Corporation, Case No. 15-2424, and the opinion is here: https://media.ca8.uscourts.gov/opndir/16/03/152424P.pdf
According to the opinion, the underlying matter involved a class action filed by current and former franchisees against Maid-Rite. The allegations were that Maid-Rite made false representations regarding the company’s profitability that induced them into purchasing the franchises. In September 2014, Maid-Rite and the other defendants retained the law firm as counsel. The engagement letter provided that the law firm would bill on an hourly basis and the firm “reserved the right to withdraw from this representation for good cause.” “Good cause” included the failure to make timely payments and the failure to follow the firm’s advice on a “material matter.”
The opinion states that the client paid one invoice but failed to pay any more invoices and the firm “repeatedly advised them that the firm would seek to withdraw unless their outstanding bills were paid. Although defendants promised several times to pay the invoices, they did not and a significant unpaid balance resulted. Defendants also repeatedly failed to provide Larkin with information critical for its defense.” On January 28, 2015, the firm moved to withdraw and, on April 16, 2015, the magistrate judge stayed discovery while the district court considered the motion. The district court affirmed on June 5, 2015 and the firm filed an interlocutory appeal with the federal Eighth Circuit Court of Appeals.
The opinion applied the Minnesota Rules of Professional Conduct, which permit a lawyer to withdraw if:
(5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;
(6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or
(7) other good cause for withdrawal exists.
The Minnesota Bar Rule also requires the lawyer to show good cause and notify the client of the motion to withdraw. The opinion found that the firm met all the requirements to file a motion to withdraw and; therefore, a presumption arose that the firm would be permitted to withdraw. The opinion also stated that “there was no rebuttal to the presumption that withdrawal was appropriate since there was no evidence that the firm waited too long to withdraw and the discovery period was still open. There was also no prejudice to any third parties.” The opinion reversed the trial court’s order as an abuse of discretion. And permitted the firm to withdraw. The opinion followed Fid. Nat’l Title Ins. Co. v. Intercounty Nat’l Title Ins. Co., 310 F.3d 537 (7th Cir. 2002), which held that a law firm could file an interlocutory appeal to challenge the denial of a motion to withdraw.
Bottom line: Lawyers who would like to withdraw from representing a client must be prepared to cite a proper basis for the withdrawal under the Bar rules, whether it is permissive or mandatory. This law firm’s motion to withdraw in the federal case was denied by the trial court; however, the firm was permitted to file an interlocutory appeal challenging the denial, and the appeals court granted the withdrawal. Not all jurisdictions may permit interlocutory appeals of such an order and, in most jurisdictions (including Florida), if the court does not permit the withdrawal (and any appeals are exhausted), the lawyer is required to continue the representation, notwithstanding any financial burden and/or the failure of the client to fulfill his or her obligations.
Be careful out there!
Disclaimer: this Ethics Alert is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.
Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
Fax (727) 799-1670