Opinion 395

Statement of Facts Discussion Conclusion

MODIFICATION OF OPINION 395

Opinion 395, rendered by the Committee on Professional Ethics provides in part, as follows: "Such arrangement can, however, be terminated by the client; and the lawyer's remedy is to sue to recover in quantum meruit for the legal services rendered. Mandell & Wright v. Thomas, 441 S.W.2d 841 (Tex. 1969); Howell v. Kelly, 534 S.W.2d 737 (Tex. Civ. App. - Houston (1st. Dist.) 1976, no writ)."

After careful consideration, the Committee on Professional Ethics has determined that the above language should be eliminated from the opinion and the following language substituted in its place: "Such arrangement can, however, be terminated by the client; and the lawyer's remedy is to bring an action in court to recover his damages. Mandell & Wright v. Thomas, 441 S.W.2d 841 (Tex. 1969); Howell v. Kelly, 534 S.W.2d 737 (Tex. Civ. App. - Houston (1st Dist.) 1976, no writ)."

ORIGINAL OPINION
May 1979
Tex. Comm. on Professional Ethics, Op. 395, V. 42 Tex. B.J. 436 (1979)

1. May a lawyer confer with a prospective client who is already represented by another lawyer?
   
   As a general rule, a lawyer has the right to give advice to anyone seeking his counsel. The lawyer's right, in this respect, is more accurately described as the privilege of every lawyer which derives from the client's right to be represented at all times by counsel of his own selection. A.B.A. 246 Comm. on Prof. Ethics, Opinion No. 10 (July 1926).
   
   The only qualifications the Code imposes on a lawyer's privilege to confer with a prospective client are found in DR 2-103 and DR 2-104(A), dealing with personal solicitation. A lawyer may not give unsolicited advice to a layman regarding his own employment. Further, if a lawyer voluntarily advises a layman to obtain counsel or take legal action, he is prevented from accepting employment resulting from that advice. While recent decisions of the Supreme Court of the United States have somewhat eroded the limitations on solicitation, the restrictions would still apply in most cases involving private practitioners. Compare Ohrlik v. Ohio State Bar Association, ____ U. S. ____, 56 L. Ed.2d 444, 98 S. Ct. ____ (May 30, 1978), with Primus v. United States, ____ U.S. ____, 56 L. Ed.2d 417, 98 S. Ct. ____ (May 30, 1978).
   
   The limitations upon solicitation do not apply when a layman solicits a lawyer's advice; neither do they apply to a lawyer who advises a former client on matters germane to the prior employment, a current client, a close friend or a relative. DR 2-104(A)(1). Thus, as long as the prospective client approached the lawyer and initiated the discussion, the lawyer may confer with that person even though the client already has another lawyer.
   
   If an offer of employment is made, a lawyer is obligated to satisfy himself that the client's former lawyer has withdrawn or has been terminated by the client before he may ethically take charge of the case. A.B.A. Comm. on Prof. Ethics, Opinions No. 10, 130, 149, 209 (1926, 1933, 1936, 1940) and Informal Decisions 360(A), 834 (1950, 1965). A.B.A. Informal Decision 360(A) states: "When retained in a matter previously handled by another, a lawyer should make sure that his client has discharged the other lawyer and has so advised him. While it is not necessary for him to communicate with the other lawyer, it is courteous for him to do so."
   
   The A.B.A. Committee on Professional Ethics has also clearly stated that a lawyer properly may accept employment even though the lawyer originally engaged had a contract with the client. In Opinion No. 10, the Committee stated: "The lawyer originally engaged has his remedy at law for any breach of contract which may occur through the client's termination of his employment but he cannot insist that his professional brethren refuse employment in the matter merely because he claimed such a breach of contract. To hold otherwise would be to deny a litigant's right to be represented at all times by counsel of his own selection."
   
   Various state and local bar associations, as well as the American Bar Association, have held that the substituting lawyer has no duty with reference to the fees of the first. 15 Colo. B.A.N.L. 3 (March 1968); Fla. Op. No. 383 (July 1969), 75 Trans. Md. S.B.A. 22 (1970); La. B.J. 186 (1968); 39 Cleveland B.A.J. 4 (1967); 46 Mich. S.B.J. 32 (1967); 47 N.Y. S.B.J. 338 (1975);
   
   A.B.A. Comm. on Prof. Ethics, Informal Op. 1142 (1970).
2. When a client employs a lawyer under a contingent fee contract, which includes a provision to the effect that neither party may settle the litigation without the written consent of the other and which makes a present assignment of an interest in the litigation to the lawyer, may the lawyer refuse to be discharged by the client?

DR 2-110(B)(4) provides that a lawyer must withdraw from representing a client if he is discharged by his client. If a lawyer is representing a client before a tribunal and permission for withdrawal is required by the rules of the tribunal, the lawyer who is discharged by his client must withdraw with the permission of the tribunal. DR 2-110(A)(1) and (B). Thus, if a lawyer has been discharged by his client, he cannot refuse to withdraw even though his fees have not been paid and he has not been reimbursed for any expenses or any disbursements incurred on behalf of his client.

The fact that the lawyer must withdraw does not release the client from obligations under the employment contract. The lawyer retains all legal rights he might have against the client for breach of contract or for payment for services rendered.

A contingent fee contract cannot restrict the client's right to discharge the lawyer and cannot be relied upon to avoid the lawyer's obligation to withdraw upon being discharged by his client. Texas cases decided after enactment of the Code of Professional Responsibility have recognized that contingent fee contracts for attorney's fees are permissible. Such arrangements can, however, be terminated by the client; and the lawyer's remedy is to sue to recover in quantum meruit for the legal services rendered. Mandell & Wright v. Thomas, 441 S.W.2d 841 (Tex. 1969); Howell v. Kelly, 534 S.W.2d 737 (Tex. Civ. App.-- Houston [1st Dist.] 1976, no writ).

A lawyer cannot refuse to withdraw because his employment contract makes a present assignment of a part of the cause of action in his favor. DR 5-103, entitled "Avoiding Acquisition of Interest in Litigation", states: "(a) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client, except that he may: (1) acquire a lien directed by law to secure his fee or expenses. (2) contract with a client for a reasonable contingent fee in a civil case."

In Dow Chemical Co. v. Benton, 163 Tex. 477, 357 S.W.2d 565 (1962), the Texas Supreme Court accepted the rule that a properly worded contingent fee contract may effect an assignment of part of the recovery and a part of the cause of action to a lawyer. The court held, however, that the lawyer's "interest" in the cause of action is wholly derivative from his client's interest and the lawyer may not prosecute the action on his own account to realize his contingent fee, unless the attorney-client relationship has been interfered with through the inducements of the opposite party. While the lawyer has control over certain details of the work, the client is entitled to make all major decisions and the lawyer is not permitted to continue a court action against the wishes of a client. Jones v. Stuart, 128 Tex. 309, 97 S.W.2d 949 (1936); Kelly v. Gross, 4 S.W.2d 296 (Tex. Civ. App.--El Paso, 1928, no writ). Thus, such an employment contract or assignment cannot preclude a client from discharging his lawyer and employing substitute counsel.

It is also improper for a lawyer to take from his client a power of attorney purporting to give the lawyer the control of the case. State Bar of Texas, Comm. on Prof. Responsibility, Opinion No. 330 (1966). Thus, including such a provision in an employment contract would be misleading to the client and unethical because the lawyer may not ethically enforce such a provision. 3. Under what circumstances may a client and a lawyer assert an attorney's lien with respect to a client's property, papers and files, by refusing to deliver the property, papers and files to the client, where the client has not paid the lawyer's fees and expenses?

DR 2-110(A)(2) provides, in part: "In any event, a lawyer shall not withdraw from employment until he has taken reasonable steps to avoid foreseeable prejudice to the rights of his client, including . . . . delivering to the client all papers and property to which the client is entitled and complying with applicable laws and rules."

Thus, the Code does not expressly require that a lawyer deliver all papers and property to his client and does not prescribe what the papers and property must be delivered since the lawyer must deliver only those papers to which the client is "entitled".

Most jurisdictions recognize the lawyer's right to claim a common law lien against a client's property, money and papers which are in the lawyer's possession for the amount due him from the client for professional services, expenses and disbursements. Annot., 3 A.L.R.2d 148 (1949). Some states, however, do not recognize a lawyer's right to claim a common law possessory lien. See, e.g., Academy of California Optometrist, Inc. v. Superior Court, 51 Cal. App.3d 999, 124 Cal. Rep. 668 (1975).

No general statutory attorney's lien exists under Texas law, but in a number of early decisions Texas courts recognized an attorney's right to claim a common law possessory lien against a client's property, money and papers for the amount due to the attorney from the client for professional services, expenses and disbursements. See, e.g., Thompson v. Findlater Hardware Co., 109 Tex. 235 (1918); Casey v. March, 30 Tex. 180 (1867); Finkelstein v. Roberts, 220 S.W. 409 (Tex. Civ. App.--Fort Worth 1920, writ dismissed w.o.j.); Thompson v. Findlater Hardware Co., 156 S.W.2d 301 (Tex. Civ. App.--Austin 1913). These decisions generally hold that the attorney's possessory lien is perfected and protected only by the continued possession of the client's property, money and papers which came into the lawyer's possession in his capacity as counsel for the client. A common law possessory attorney's lien has been held to be unenforceable, however, if the lawyer voluntarily withdraws from representing the client, if the lawyer is justifiably discharged by the client because of misconduct, if the lawyer relinquishes possession of the client's property, money and papers or if the lawyer has not demanded payment of the debt. See Smith v. State, 490 S.W.2d 902, 910 (Tex. Civ. App.--Corpus Christi 1972, writ ref'd n.r.e.).

The State Bar of Texas has not issued any opinions regarding the ethical responsibilities of a lawyer who attempts to enforce an attorney's common law lien by retaining possession of his client's property, money or papers pending payment of fees, expenses and disbursements by the client. In Opinion 118, Opinions of the State Bar of Texas Committee on Interpretation of the Canons of Ethics (September 1955), the Committee was asked to consider the nature of the papers that a lawyer is required to deliver to his client when he has been discharged by his client. The Committee ruled: "(1) The attorney should not be required to deliver his entire set of files to his client upon termination of the professional relationship. (2) The attorney should retain within his files all matter purely personal to him and should turn over to the client only those papers which would affect either the rights or the exercise of the rights of the client. (3) The attorney is privileged to delay delivering items to the client until he has had an opportunity to make an inventory of his files and determine what should be turned over to the client."

In Opinion 209, Opinions of the Committee on Professional Ethics of the American Bar Association (November 23, 1940), the A.B.A. Committee was asked to consider whether an attorney who has been charged by his client without payment of an adequate fee for services performed may (i) hold the client's papers as a lien, or (ii) prevent the client from engaging another attorney. The Committee ruled that the questions raised were questions of law rather than questions of ethics and, therefore, the Committee refused to issue an opinion. The Committee noted, however, that an ethical question would exist if the fee claimed by the lawyer represented a "flagrant overcharge".

Some bar associations have followed the reasoning of A.B.A. Opinion 209 and have refused to consider the question of the propriety of an attorney retaining a client's papers to secure payment of fees and expenses because it presented a question of law. 6 Ariz. B.J. 38 (Dec. 1970), Opinion 238 (1968); 6 Ariz. B.J. 18, Opinion 99 (1962); 44 Fla. B.J. 404 (1970), Opinion 68-21 (1968); 44 Fla. B.J. 406, Opinion 68-37 (1968). Several jurisdictions have expressly ruled that, under the proper circumstances, it is not unethical for a lawyer to retain a client's papers to secure payment of his fees and expenses. 32 Conn. B.J. 86, Opinion 7 (1958); Cleveland B.A. Opinion 5 (1951); 37 Fla. B.J. 977, Opinion 62-71 (1963) and Opinion 65-10 (1965); N.Y. City 333, Opinion 590 (1941); N.Y. City 7, Opinion 12 (1924). At least two bar associations, however, have ruled that it is always improper for a lawyer to retain a client's papers to secure payment of fees, expenses and disbursements. 3 L.A.B.B. 25, Opinion 25 (1928); 16 La. B.J. 186 (1968), Opinion 320; 12 La. B.J. 33 (1965), Opinion 227; 12 La. B.J. 334, Opinion 221 (1965). No opinions concerning this question have been issued by the State Bar of Texas.

Since an attorney's common law lien can be perfected and protected only by continued possession of the client's papers, a determination that a lawyer must return the papers to his client effectively terminates the attorney's lien. DR 2-110(A)(2) does not expressly prohibit the assertion of an attorney's lien and, in fact, DR 2-110(A)(2) implies that there are circumstances in which the client is not entitled to the return of his file. DR 2-110(A)(2) further provides, however, that, in any event, a lawyer must "avoid foreseeable prejudice to the rights of his client." Likewise, EC 2-32 requires a lawyer "to minimize the possibility of harm" even when he justifiably withdraws. Thus, while the Code does not expressly prohibit the assertion of an attorney's lien, where the attorney's lien is recognized by the law of the jurisdiction involved, it places severe ethical restrictions upon an attorney's right to assert his lien where the client's legal rights would be jeopardized.

This Committee cannot express an unqualified opinion that a lawyer may assert a common law attorney's lien by retaining his client's property, money and papers until the amount due to the lawyer from the client for professional services, expenses and disbursements has been paid since the validity of such a lien is a question of law. The assertion of an attorney's lien will present both ethical and legal questions which must be decided under the facts and circumstances of each case.

As indicated by A.B.A. Opinion 209, an ethical question would be presented if the fee charged represented a "flagrant overcharge" (i.e. "clearly excessive") and if the client justifiably discharged the lawyer for misconduct. Likewise, a lawyer ethically may not attempt to enforce his attorney's lien by retaining possession of his client's property, money and papers where the client's legal rights would be prejudiced. See, e.g., N.C.S.B. 67, Opinion 7 (1943) [involving a pending lawsuit].

Any lawyer who contemplates retaining possession of his client's property and papers should be aware of the possibility that his action may be determined to be unethical because (i) the attorney's lien is legally unenforceable; or (ii) enforcement of the lien results in damage or prejudice to his former client's legal rights. The decision in Smith v. State, 490 S.W.2d 902 (Tex. Civ. App.-- Corpus Christi 1972, writ ref'd n.r.e.), motion to retax costs denied, 500 S.W.2d 682 (1973), on appeal after remand, 523 S.W.2d 1 (1975, writ ref'd n.r.e.), provides an example of a situation in which a jury determined that a lawyer's action in retaining a former client's documents was unethical.

In Smith v. State, the State Bar of Texas brought suit to disbar a lawyer and part of the basis for this suit was that the lawyer had "willfully" refused to relinquish possession of certain documents to his former client (or his former client's new attorney) after having been discharged. At the first trial, the trial court apparently refused even to submit to the jury the defendant's requested issues and instructions concerning his right to assert a possessory lien, and the jury found that the defendant-lawyer's conduct was unethical. 490 S.W.2d at 910. The trial court's ruling in this respect was affirmed. Upon remand for new trial, however, the trial court apparently submitted the defendant's requested issues and instructions concerning an attorney's right to assert a possessory lien. Nevertheless, the jury again found that the defendant was not trying to establish a possessory lien but "that he was willfully and wrongfully refusing to relinquish a client's documents." 523 S.W.2d at 6. While the facts in Smith v. State may be unique, the decision emphasizes that an attorney refuses to relinquish his client's files at his risk.

1. A lawyer ethically may confer with a prospective client who has solicited his advice, even though that client is already represented by other counsel. Also, a lawyer may accept employment as substitute counsel if the client's former lawyer has withdrawn or been terminated by the client.
2. As stated in Disciplinary Rule (DR) 2-110(B)(4), a lawyer shall withdraw from employment if he is discharged by his client. An employment contract between a lawyer and a client cannot in any way justify the lawyer in refusing to withdraw upon being discharged by his client.
3. In general, the existence and enforceability of an attorney's lien with respect to a client's property, papers and files is a question of law. In Texas, an attorney's lien is recognized by the common law under certain circumstances. The Code of Professional Responsibility (the "Code"), however, does place restrictions upon the lawyer's right to assert a possessory lien with respect to a client's property, papers and files.

The Code provides that where a lawyer withdraws, whether the lawyer is discharged by the client or justifiably withdraws, he must take reasonable steps to avoid foreseeable prejudice to the rights of his client, including delivering to the client all the papers and property which the client is "entitled". Thus, a lawyer ethically may assert his attorney's lien with respect to a client's papers and property only where the attorney's lien is enforceable under the law and, in any event, may not refuse to deliver the client's papers and property to the client if retention of the file would prejudice the rights of the client.