Competence & Malpractice · 6-12% of the exam
12.3.1Prospective Limitation of Malpractice Liability (Rule 1.8(h)(1))
Why
At the moment an engagement letter is signed, the client is least able to judge what they are giving up and most dependent on the lawyer who drafted the terms. A cap buried in that document benefits the lawyer against a risk the client cannot yet see, in a bargain the client has no independent way to price.
Plain English
A lawyer must not make an agreement prospectively limiting malpractice liability to a client unless the client is independently represented in making it — the client's own consent is not enough.
Agreeing in advance to arbitrate future malpractice claims travels a different track: independent representation is not required, but the clause must be proper under governing local law and the client must understand what it covers and how it will operate. Defining the scope of a representation is not a liability limitation either, unless the definition makes the lawyer's obligations illusory, in which case it counts as an attempt to limit liability.
Prospective limitation of malpractice liability (Rule 1.8(h)(1))
Two points, and the second is where the first gives way:
- A lawyer must not prospectively agree to limit malpractice liability to a client
- Exception: the limitation is permissible if the client is independently represented in making the agreement
Two points on the arbitration exception, and the first carries two conditions of its own:
- A lawyer and client may agree in advance to send future malpractice claims to arbitration, provided that:
- The arbitration clause is proper under the governing local law; and
- The client grasps what the clause covers and how it will operate
- Independent representation is not required for the arbitration clause
Defining the scope of the representation is not a liability limitation either, but a definition of scope that makes the obligations of representation illusory amounts to an attempt to limit liability (Rule 1.8 Comment [17]; see Chapter 4, Rule 1.2(c)).
Mnemonic
Mnemonic
represented before, writing after.
- Prospective liability limitation: the client must actually be independently represented (strictest protection)
- Settling an existing claim: an unrepresented client or former client must receive written notice that independent representation is desirable and a reasonable opportunity to seek it (less strict)
- Both require some form of independent protection; the degree differs — applying the wrong requirement to each situation is a common exam error
Example 1
Ex. 1
Ben hired a local business attorney to handle a commercial lease negotiation. The engagement letter was three pages. Near the end, in the same standard type as the rest of the document, a clause capped any malpractice recovery at $15,000. The attorney did not mention the cap during their meeting. The attorney did not suggest Ben seek outside review before signing. Ben returned the signed letter that week. A year later, the attorney misread a rent-escalation clause in the final lease. Ben suffered losses exceeding $175,000.
The cap is unenforceable — a civil consequence supplied by case law, not by Rule 1.8(h), which states a disciplinary prohibition only. Rule 1.8(h)(1) prohibits any prospective liability limitation unless the client is independently represented in making the agreement. Ben had no independent counsel. His signature, however knowing, doesn't satisfy the rule. He may pursue his full damages. Rewrite the clause in bold on page one and read it aloud to Ben; the cap is still unenforceable.
Trap
Questions · 2
Q 01ch12-e08
Question 1 of 2 · Rule 1.8(h)(1)
Attorney was retained by Client to handle the purchase of a commercial building. The engagement letter ran three pages, and near the end, in the same type as the rest of the document, a clause capped any recovery against Attorney for professional negligence at fifteen thousand dollars. Attorney did not mention the clause during the meeting and did not suggest that Client have another lawyer look at the letter. Client read the letter, understood the cap, and signed it that week. A year later Attorney missed a recorded easement, and Client suffered a loss far larger than the cap. Is Attorney subject to discipline?
Keys 1 to 4 choose.