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Bar News - March 23, 2001 Potential Pitfalls in Forming the Lawyer-Client Relationship By: William C. Saturley & John C. Kissinger Issues in Professional Liability THE AMERICAN LAW Institute recently published the Restatement of the Law (Third): The Law Governing Lawyers. The Restatement addresses virtually all aspects of the lawyer-client relationship. It also takes positions in many areas that are not addressed by ethical rules. Since courts frequently cite to various versions of the Restatement for guidance on a variety of topics, it is reasonable to assume this edition will become one factor considered by courts and other fact-finding bodies when they evaluate questioned attorney activities. In a series of articles over the next few months, we will examine some aspects of the Restatement, focusing on certain major issues that are encountered by many practitioners here in New Hampshire. This article will discuss the Restatement’s treatment of the creation of the lawyer-client relationship. Establishing the lawyer-client relationship The formation of a lawyer-client relationship creates obligations and potential exposure to liability. Accordingly, the point in time when the lawyer-client relationship is actually established can be of significant importance. Section 14 of the Restatement provides as follows: A relationship of client and lawyer arises when: (1) a person manifests to a lawyer the person’s intent that the lawyer provide legal services for the person; and either (a) the lawyer manifests to the person consent to do so; or (b) the lawyer fails to manifests lack of consent to do so, and the lawyer knows or reasonably should know that the person reasonably relies on the lawyer to provide the services; or (2) a tribunal with power to do so appoints the lawyer to provide the services. In most cases the client-lawyer relationship is consensual—the client and lawyer mutually arrive at a decision to create their relationship. In such circumstances, the client’s "manifestation" of intent often will be explicit. In other cases, determination of the client’s intent must be made by examining all of the surrounding facts and circumstances. • The New Hampshire Supreme Court has observed that the lawyer-client relationship is established when "(1) a person seeks advice or assistance from an attorney, (2) the advice or assistance sought pertains to matters within the attorney’s professional competence and (3) the attorney expressly or impliedly agrees to give or actually gives the desired advice or assistance." McCabe v. Alcidy, 138 N.H. 20, 25 (1993). The burden to establish the existence of the relationship rests on the party alleging such fact. Id. • An appellate court reversed a malpractice verdict against an attorney who filed an appearance on behalf of a party at the request of a third person. Despite the fact that a default judgment was subsequently entered against the party, the court ruled that the unauthorized entry of an appearance did not create a continued duty on the attorney’s part to appear for the party absent authorization. See Zych v. Jones, 406 N.E. 2nd 70 (Ill. App. Ct. 1980). • In another case, a lawyer’s secretary told a potential client to send a letter, arranged for a medical examination and told the client to write to the opposing party. The potential client’s letter to the attorney was misfiled and not discovered until after the statute of limitations passed. The court concluded that there were ample facts for the jury to find that the secretary had either real or apparent authority on behalf of the lawyer to establish the lawyer-client relationship. See DeVaux v. American Home Assurance Co., 444 N.E. 2nd 355 (Mass. 1983). The Restatement makes it clear that formation of the lawyer-client relationship is not unilateral. That is, the client must manifest an intent for the lawyer to provide legal services and the lawyer must either consent or fail to manifest lack of consent. Determination of whether a relationship is established invariably depends on the specific facts of a given case. Duties can extend to prospective clients The Restatement seeks to afford prospective clients some, but not necessarily all, of the protections afforded clients. Prospective clients frequently disclose confidential information to lawyers. While New Hampshire Rule of Professional Conduct 1.6 sets out the responsibilities of a lawyer in revealing confidential client information, the Restatement describes a lawyer’s duties with respect to information provided by prospective clients. Section 15 of the Restatement provides, in pertinent part, as follows: (1) When a person discusses with a lawyer the possibility of their forming a client-lawyer relationship for a matter and no such relationship ensues, the lawyer must: (a) not subsequently use or disclose confidential information learned in the consultation...; (2) A lawyer subject to Subsection (1) may not represent a client whose interests are materially adverse to those of a former prospective client in the same or a substantially related matter when the lawyer or another lawyer whose disqualification is imputed to the lawyer...has received from the prospective client confidential information that could be significantly harmful to this prospective client in the matter, except that such a representation is permissible if: (a)(i) any personally prohibited lawyer takes reasonable steps to avoid exposure to confidential information other than information appropriate to determine whether to represent the prospective client, and (ii) such lawyer is screened... or (b) both the affected client and the prospective client give informed consent to the representation.... Under certain circumstances, a lawyer may be disqualified from subsequent representation of a party adverse to a prospective client. • Where prospective clients held short meetings with attorneys in the process of deciding which firm to retain, but did not disclose detrimental confidential information, a court concluded that disqualification was not required. See B.F. Goodrich Co. v. Formosa Plastics Corp., 638 F. Supp. 1050 (S.D. Tex. 1986). • By contrast, a telephone conversation about the possibility of representation that included a discussion of the merits was held to create a lawyer-client relationship barring subsequent representation of another party. See Bais v. Theran, 639 N.E. 2nd 720 (Mass. 1994). In cases where a prospective client is interviewing more than one firm, lawyers may want to consider the extent and nature of information the client divulges prior to retaining the firm. The Restatement sections addressing formation of the lawyer-client relationship and the duties owed by an attorney when dealing with prospective clients raise important issues that should be considered by New Hampshire practitioners. If a lawyer-client relationship is held to be established, it triggers a host of responsibilities. Accordingly, practitioners should take care to make sure that expectations of prospective clients are clear. Moreover, in dealing with potential clients, lawyers should be aware that the nature of the interaction and information disclosed by prospective clients might disqualify a firm from future representation of another party. William C. Saturley and John C. Kissinger practice in the commercial litigation and professional malpractice groups at Nelson, Kinder, Mosseau & Saturley in Manchester.
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