Ethics Watch Dealing With Unhappy Clients, Part 1

• Citation: Vol. 36-6
• Year: 2025

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Ethics Watch Dealing with Unhappy Clients, Part 1

Vol. 36 Issue 6 Pg. 16

South Carolina Lawyer

May, 2025

Dealing with Unhappy Clients

BY NATHAN CRYSTAL

"All happy families are alike; each unhappy family is unhappy in its own way" — Leo Tolstoy's famous opening sentence in his 1878 novel, Anna Karenina . Tolstoy's observation applies to lawyers and their clients as well as families. When clients are happy, they typically express satisfaction to their lawyers for work well done, timely pay their fees, and frequently refer other business to their counsel. But when clients are unhappy, the causes can be multiple, and the clients can express their unhappiness in many ways. Given the diverse ways in which clients can become unhappy, what should a lawyer or law firm do? or, as Hamlet put it, "ay, there's the rub." In this article I suggest a number of ways in which lawyers can deal with potentially unhappy clients either by declining representation, minimizing the risk of unhappiness from occurring by limited engagement agreements, or_ withdrawing from representation when unhappiness does occur.

I. Cutting the Gordian Knot: declining representation of clients who are likely to be unhappy with a lawyer's services.

Clients who are unhappy with their representation often cause trouble for their lawyers. Unhappy clients are time consuming because lawyers must deal with their questions, complaints, and anger; the time spent in dealing with an unhappy client often cannot be billed at the lawyer's normal rates, if at all. In extreme cases clients may post negative reviews on the internet, file disciplinary charges against their lawyers, bring suit for legal malpractice or breach of fiduciary duty.

Lawyers are generally free to accept or decline representation for any reason or no reason. See ABA Formal Op. 516 at 1. While the ABA has adopted an anti-discrimination ethics rule, ABA Model Rule 8.4(g), South Carolina has not done so, and even if it did, the rule would not "limit the ability of a lawyer to accept, decline or withdraw from a representation in accordance with Rule 1.16."

In medicine, prevention of the illness is almost always more effective than the cure; lawyers can also use the technique of prevention to avoid dealing with unhappy clients. In deciding whether to decline representation lawyers need to have a list of "red flag" potential^[1] clients ("RFPC") who are likely to become unhappy actual clients if the lawyer undertakes the representation.

Here is our list of factors characteristic of RFPC^[2]:

1. The potential client has had multiple lawyers; often the client will complain about prior representation and may accuse the former lawyers of malpractice.

2. The potential client has a long story to tell of the wrongs that the prospective client has suffered.

3. The potential client expresses a high level of anger or emotion, including seeking revenge.

4. The potential client sends to you - unsolicited - a large number of documents to examine.

5. The potential client says or indicates that he or she is "interviewing" other lawyers about the case.

6. The potential client has grand expectations about his case ("My case is worth $100 million").

7. You don't trust the potential client or, for whatever reason, he or she "rubs you the wrong way."

8. Without being indigent, the potential client expresses unusual concern about fees and/or expenses, for example, if the potential client's first question is about cost or if the client is unwilling to pay a modest initial consultation fee.

9. The potential client has a specific goal and wants the lawyer to implement the goal, for example, "I just want you to prepare a simple contract that includes the following."

10. The potential client has done research into his or her problem, typically using artificial intelligence such as ChatGPT.

11. The potential client wants your opinion about the case based on the initial information submitted.

In some situations a lawyer may be able to identify an inquirer as a RFPC based only on the communications received from the potential client, for example a lengthy email in which the potential client expresses frustration with the multiple lawyers with whom he or she has consulted previously. Operationally, if the potential client exhibits any one of the first six factors, the lawyer should strongly consider turning down the case without further inquiry or meetings with the potential client because the likelihood that the client will be unhappy with your services are too great.

II. Using consultations to reduce the risk of undertaking representation of RFPC

If none of the first six factors are present, or if the lawyer is uncertain about accepting representation, the lawyer could consider a consultation with the potential client. Many, perhaps most, lawyers do not think of consultations as involving significant issues, but they are wrong; structuring consultations requires consideration of a number of questions. The first issue with regard to consultations is economic: Will the consultation be without charge or for a fee? In my opinion fee-paid consultations have several advantages. A fee-paid consultation in anticipation of a larger engagement enables the lawyer to validate the potential client's seriousness about the matter and the degree to which the client is concerned about fees and expenses. Further, "gratuitous" consultations can take a good deal of nonrevenue-producing time. This kind of uncompensated time stands in contrast to intentionally undertaken pro bono representations on behalf of indigent clients. Indeed, the routine practice of gratuitous consultations may even displace time that could otherwise be reserved for meaningful pro bono work.

Assuming the lawyer will be offering the client the opportunity for a fee-paid consultation, the fee should be paid in advance and should be a fixed fee for the consultation. In South Carolina fixed fees can be placed in the operating rather than in the trust account if the requirements of SCRPC 1.5(f) are met. The fee can be paid through the use of services such as Zelle or Venmo.

What are the ethical implications of a fee-paid consultation? Since clients are paying a fee, their expectation is that they will receive some, albeit limited, legal services at the consultation. To avoid client misunderstanding and to limit the lawyer's responsibility, the lawyer should have a written engagement for the consultation that specifies the services the lawyer will be rendering. It does not need to be a lengthy engagement; an email defining the scope of the services that will be rendered at the consultation and the fee arrangement is sufficient. However, there are several important points to be covered in a "consultation engagement." One important aspect of the consultation is whether the lawyer will be reviewing documents in connection with the consultation. For some matters it may not be necessary for the lawyer to review documents. If some level of document review is necessary for the consultation to be useful, that time could be built into the fee structure for the consultation. For example, if one hour of document review is necessary, a lawyer whose standard rate is $500 per hour, could charge $750 for a half hour consultation. Lawyers could also consider offering a discounted consultation fee. If the lawyer offers a discounted fee for the consultation, the consultation engagement should make clear that the discount only applies to the consultation engagement and not to a larger engagement that might follow the consultation. Also, the engagement email is the proper place to provide any jurisdictionally-required notice that the consultation fee will be deposited into the firm's operating account, rather than held in trust.

While an attorney-client relationship can ensue even when no fee is paid, if a lawyer offers legal services for a fee, an actual rather than prospective attorney-client relationship results. Therefore, before proceeding with the consultation, the lawyer should conduct a conflict check.

In some situations, the lawyer's legal services are concluded with the consultation and no further legal work is anticipated. In that case on conclusion of the consultation, the client would be a former client, and the lawyer's representation in other matters against that client would be governed by Rule 1.9.

In other cases the consultation may be "forward looking" in the sense that one of the major purposes of the consultation is to discuss fees and scope of representation in a substantial matter following the consultation. The engagement for the consultation should specify that the lawyer is not undertaking representation for future matters related to the consultation; such representation requires a separate, additional engagement agreement and the fee for that matter.

With regard to forward-looking consultations, even if no engagement results for the future matter being discussed, the client would be a prospective client as to the forward-looking matter under Rule 1.18, entitled to the protections of confidentiality under that rule. Under Rule 1.18 a lawyer will be disqualified from representing a client against the former prospective client when the lawyer has acquired information that could be significantly harmful to the prospective client. In addition, screening of a disqualified lawyer will not prevent disqualification of the lawyer's firm if the lawyer acquired more information than was reasonably necessary to determine whether to represent the prospective client. "Reasonably necessary" information generally falls into either of two categories: information necessary to comply with the lawyer's professional obligations (e.g., competency to handle the matter) and information that relates to the lawyer's general business decisions (e.g. fees and expenses). If a lawyer has a "free flowing" discussion with a prospective client that goes beyond acquiring reasonably necessary information then the lawyer and the lawyer's entire firm will be disqualified from representing a client against the former prospective client. See Nathan M. Crystal, Prospective Client Consultations - The Firm Disqualification Dilemma Resulting from ABA Formal Opinion 510 (May 2024).

III. Withdrawing from representation of a RFPC

Suppose a lawyer has undertaken representation of a client and, despite the lawyer's best efforts, the situation has ripened into an unhappy client. What should the lawyer do? One possibility is withdrawal from representation, but may the lawyer ethically do that? Rule 1.16 deals with withdrawal from representation. The rule contemplates two forms of withdrawal: mandatory under Rule 1.16(a) and permissive under Rule 1.16(b). If the situation falls under any of the categories listed in those sections, the lawyer either must (section (a)) or may (section (b)) withdraw from representation. Several rules could apply to allow a lawyer to withdraw from representation of an unhappy client: if the lawyer has a fundamental disagreement with the client, Rule 1.16(b)(4); if the client makes representation "unreasonably difficult" under Rule 1.16(b)(6) or if the attorney has "good cause" for withdrawal, Rule 1.16(b)(7). If the matter is in litigation, the lawyer must still obtain court permission to withdraw. For a discussion of the case law in South Carolina interpreting Rule 1.16, see Nathan M. Crystal, Annotated South Carolina Rules of Professional Conduct (forthcoming 2025).

Suppose the situation doesn't fall within any of the specific grounds for withdrawal under Rule 1.16. Instead, the lawyer simply regrets undertaking the representation of the client. May the lawyer ethically "fire" the client? The ABA Ethics Committee recently addressed this issue in Formal Opinion 516, which focused on whether a lawyer could permissively withdraw from representation if "withdrawal can be accomplished without material adverse effect on the interests of the client." SCRPC 1.16(b)(1). The Committee first discussed when withdrawal would have a material adverse effect on the client's interests. The Committee identified several situations in which withdrawal would have such an effect:

• Significant harm to the forward progress of the matter because of delay, specifically delay in obtaining substitute counsel;

• Loss of counsel with unique abilities or knowledge that cannot be replicated within the time available;

• Additional expense for substitute counsel to "get up to speed." ABA Formal Op. 516 at 4.

The Committee noted that the withdrawing attorney may be able to remediate these harms in several ways:

For example, the withdrawing lawyer may help the client find a new lawyer, collaborate with successor counsel to bring the new lawyer up to speed, and/or return or forego legal fees for work that will have to be duplicated. Id. at 4.

On the other hand, the Committee identified circumstances in which withdrawal would not have a "material adverse effect":

• The representation has "barely gotten off the ground" when the lawyer discovers for any of a number of reasons that the representation would be "untenable";

• Where co-counsel can complete the work remaining in the case after the withdrawal of the lawyer;

• When the lawyer's work is substantially complete;

• When the lawyer has provided legal services in the past but there is no ongoing or imminent matter at the time the lawyer withdraws. Id. at 4-5.

The Committee noted additional points about withdrawal based on lack of material adverse effect. First, client disappointment is not a client interest that rises to the level of material adverse effect. Second, withdrawal on this ground does not require client consent. Third, the lawyer's duty of communication under Rule 1.4 requires a full explanation of the lawyer's reasons for withdrawal even though client consent is not required. Fourth, if withdrawal would not have a material adverse effect on the client, the lawyer's motivation or reasons for the withdrawal are not material. Id. at 5-6.

With regard to the motivation for withdrawal, the Committee discussed what is called the "hot potato doctrine." Under this court-made rule, derived from the common law duty of loyalty rather than Rule 1.16, a lawyer may not ethically drop or fire a client to take on a more favored (for example, more lucrative) client.

While recognizing court decisions that have applied the hot potato doctrine (although the scope, limitations, and exceptions to the doctrine are imprecise), the Committee rejected the doctrine as a proper interpretation of Rule 1.16 because the lawyer's motivation for withdrawal does not create a material adverse effect on the client. ABA Op. 516, at 6-8.

If a lawyer has entered into an engagement with a client but the lawyer now regrets the engagement for any of the reasons that would have identified the client as a RFPC, the lawyer may be able to withdraw from the representation if the lawyer can do so without material adverse effect on the client's interests, as discussed in ABA Opinion 516, for example, if the representation is barely off the ground, or co-counsel is available to handle the matter, or the counsel who plans to withdraw is able to remediate the withdrawal by assisting the client in obtaining other counsel. The withdrawing lawyer may be able to soften the withdrawal by refunding all or a portion of the fees the client has paid, forgoing outstanding fees, or by paying a portion of the fees of substitute counsel, although none of these actions are ethically required. If the matter is transactional, court permission is not required.

While the ABA Opinion advised that the hot-potato doctrine is not a proper interpretation of Rule 1.16, it cautioned lawyers that courts were still free to use the concept and to sanction lawyers for disloyalty or deny motions for withdrawal:

Courts are, of course, free to exercise their supervisory authority over trial lawyers by disqualifying those who drop a client "like a hot potato" to advocate against that client in another case. Courts may elect to do so as a sanction or remedy for the lawyer's perceived disloyalty or to remove the incentive for lawyers to end representations for what courts regard as inappropriate reasons. Id. at 8.

*Thanks to my law partner, Francesca Giannoni-Crystal, for her comments.

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Notes:

^[1] I use the term "potential" rather than "prospective" client because lawyers have ethical obligations to prospective clients under Rule 1.18, while a potential client does not have those rights. For example, an unsolicited email, letter, or voice mail message would not make the inquirer a prospective client. See SCRPC 1.18, cmt. 2.

^[2] Readers, of course, may develop their own list of factors identifying RFPC, or the operational rules for accepting or declining representation.

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