Discounting or Waiving Fees in Exchange for a Release of a Malpractice Claim

Your client or former client owes you fees. You kindly ask for payment. The client/former client refuses to pay, and says you made an error in the representation. You want to simply discount your fees in exchange for the a release of the malpractice claim. Is this permissible? It is permissible as long as you comply with the rules of professional conduct. Model Rule 1.8(h)(2) provides that “a lawyer shall not . . . settle a claim or potential claim for such liability with an unrepresented client or former client unless that person is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel in connection therewith.” Thus, when an agreement to settle a fee dispute is broad enough to include a release of malpractice claims or where the lawyer intends to obtain a release of legal malpractice claims, a general release including a waiver of known and unknown future claims requires compliance of ethical rules by (1) advising the client in writing to seek the advice of an independent lawyer of the client’s choice regarding the settlement (unless the client is already represented) and (2) giving the client a reasonable opportunity to seek that advice. (See e.g., Cal. Form. Op. 2009-178: Be aware that this rule applies to both current and former clients. Also, many state rules of professional conduct and ethics opinions prohibit any request or provision in a settlement agreement wherein the client dismisses or refrains from pursuing a disciplinary complaint. (See, e.g., Cal. Rules of Professional Conduct, Rule 5.6(b): “A lawyer shall not participate in offering or making an agreement which precludes the reporting of a violation of these rules.”) Finally, any claim or potential claim for malpractice by a client or former client should be reported to your professional liability carrier before you engage in settlement negotiations.