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An Open-Ended Retainer Does Not Equate to Ongoing Representation

By Lindsay M. Sestile, Litigation News Associate Editor – May 18, 2011

In Banning Ranch Conservancy v. Superior Court of Orange County [PDF], a California appellate court required a trial court to set aside its order disqualifying a law firm. The appellate court held that the mere existence of a “framework” retainer agreement between a law firm and former client was not enough to establish a current attorney-client relationship. Further, no substantial relationship between the law firm’s prior representation and its current representation had been shown. Although the disqualification order was set aside, the decision underscores the care that litigators must take in drafting clear engagement and disengagement letter agreements with their clients.

Banning Ranch Conservancy objected to plans by the city of Newport Beach to build a four-lane divided highway over a 400-acre coastal property it was dedicated to preserving as open space. Represented by legal counsel, it subsequently filed suit under the California Environmental Quality Act.

The city filed a motion to disqualify Banning Ranch’s counsel from representing it based on two conflict-of-interest theories: first, that the city was the firm’s current client based on two framework retainer agreements executed in 2005; and second, that it was the firm’s former client on several different closed matters.

The framework retainer agreements provided that the firm would provide legal services to the city “as requested," but conditioned such representation on the firm’s confirmation of its “ability to take on the matter.” They also set forth agreed-upon billable rates. Because the retainer agreements had never been terminated and did not expire under their own terms, the trial court disqualified the law firm.

Appellate Review
On a petition by Banning Ranch, the California appellate court issued a peremptory writ and held that framework retainer agreements do not necessarily create a current attorney-client relationship. It distinguished framework retainer agreements from “classic” retainer agreements, where the client pays a fee in consideration of the attorney’s future time and availability. In a classic retainer agreement, unlike a framework retainer agreement, the attorney surrenders the ability to decline the client’s future legal work.

The court also concluded that the law firm’s prior representation of the city did not disqualify it from its current representation of Banning Ranch. Without evidence of a substantial relationship between the former and present representations, the appeals court held that no presumption existed that the firm had acquired material confidential information during its prior representation that would create a conflict.

Reactions from Litigators
“The trial court mistook an open-ended engagement letter as a representation that continued unless and until there was a formal termination letter,” according to Thomas G. Wilkinson Jr., Philadelphia, cochair of the Conflicts of Interest Subcommittee of the ABA Section of Litigation’s Ethics and Professionalism Committee. “However,” he continues, “the engagement letter made clear that the law firm would accept each retention on a case-by-case basis, subject to confirming it had no conflicts.”

“Here, the appeals court was able to parse the language of the engagement agreement to avoid finding a conflict,” says Nicholas B. Reuhs, Washington, DC, also a cochair of the Conflicts of Interest Subcommittee. “More typically,” he warns, “a court is left to look at the parties’ subjective intent to determine whether the attorney-client relationship was ongoing or had lapsed.”

Some of the factors a court would consider in evaluating the parties’ subjective intent include “the existence of any retainer moneys being held in escrow by the attorney, the recency of actual work performed, the recency and nature of communications, and the client’s subsequent retention of other counsel in similar matters,” according to Reuhs.

Tips for Practice
Attorneys can minimize the risk of disqualification by “issuing a disengagement or termination of representation letter, confirming that the lawyer-client relationship has ended,” advises Wilkinson. Although lawyers often do not issue such letters out of fear of the client’s reaction, “having the letter in the file protects against an unreasonable, post hoc assertion by a former client that the relationship continues and that the firm is forever conflicted from undertaking an adverse representation,” he says.

“To the extent possible, attorneys need to be careful about delineating the commencement, scope, and termination of the attorney-client relationship,” agrees Reuhs. This case serves as a reminder that “conflict management is an ongoing process,” he adds, but it can be accomplished through “careful drafting of the retainer and conscientious file management.”

Keywords: litigation, ethics, attorney-client relationship, California appellate court, Banning Ranch Conservancy v. Superior Court of Orange County

Related Resources

  • » Banning Ranch Conversancy v. Superior Court, 193 Cal. App. 4th 903 (Cal. App. 4 Dist. 2011).
  • » Lawrence J. Fox on Ethics: Engagement Letters. ABA Section of Litigation Sound Advice (Feb. 9, 2010).


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