Friday, August 1, 2008

Overreaching In Retainer Agreement By Inserting Forum Selection Clause?

David Hricik at LEF highlights this important case in the Fifth Circuit and says it is one to watch--the story is likely not over.  I second that, fwiw.  Judge Dennis in dissent argues (correctly, to my mind) that the particular forum selection clause this lawyer had in the retainer agreement was overreaching, in light of the dynamics and obligations of the attorney-client relationship.  The panel majority enforces the clause and dismisses.

I would add that ethics rules prohibiting the seeking of waiver of legal malpractice liability, long recognized in every jurisdiction (compare medical doctors!), should also make it wrong to impose burdensome conditions on a client-plaintiff who wants to sue.  Whether this clause rises to that level is obviously a judgment call, but there can be no blanket rule that any forum selection clause in a retainer agreement is enforceable (nor does the majority suggest such a sweeping rule). 

Somewhat related, Carolyn Elefant's MyShingle blog is mulling over a model retainer agreement at posts here and here.  So, Carolyn, what do you think about inserting a forum selection clause in yours?

[Alan Childress]

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Forgive me if this is a quibble or if I am wrong. But don't the Model Rules and the rules of a minority of states permit lawyers to negotiate limitations on liability if the client is represented by independent counsel? Imho, the prohibitions against such provisions are slowly eroding -- and that's a good thing for clients as well as for lawyers.

Posted by: John Steele | Aug 1, 2008 9:53:45 AM

A very interesting case--I find the majority's view that the retention was "merely" an agreement and that the attorney "might as well" have ethical obligations as to fees disturbing. It might be of interest to the court that fiduciary duties regarding the lawyer's fee are significant enough to merit a separate rule--Rule 1.5. The idea that a contract to retain counsel is some sort of arms-length transaction without the lawyer exercising judgment for the client's benefit misunderstands the nature of the relationship.

Posted by: Mike Frisch | Aug 1, 2008 10:08:36 AM

It's not a quibble and you are not wrong. Thanks. My statement was too broad, and the current rule 1.8(h) says: (h) A lawyer shall not:

(1) make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless the client is independently represented in making the agreement....

In his Fifth Circuit dissent, Judge Dennis notes that the attorney did not even advise the clients to seek independent counsel given the disadvantageous clauses, including forum selection. But he also said, since he believed there was overreaching, he did not have to reach the question of whether the clause violated La. rules on limitation of legal malpractice.

To me, this is a curious statement in dissent, since he may have wanted to explain an alternate ground why the majority was wrong (if only because that ground may appeal to an en banc rehearer) and I think the malpractice-limiting rationale is a good one worth considering. This makes me think (along with the "our" in footnote) that Judge Dennis wrote it as a majority opinion but later lost a vote by Judge Smith who joined Judge Reavley's opinion.

Posted by: Alan Childress | Aug 1, 2008 10:24:29 AM

i find it interesting that the 2 louisiana judges who saw this case (the district court judge & judge dennis) found that the clause overreached. judge dennis is a former louisiana supreme court justice and was on that court when bosworth was decided. he has always been regarded as very knowledgable about lawyer ethics rules - as a louisiana lawyer i think that his analysis is correct under louisiana law -- apparently the 2 texas judges disagree

Posted by: fred ours | Aug 1, 2008 4:56:30 PM

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