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This post was written by LegalBizDev
Principals Mike Egnatchik, Tom
Kane, and Jim Hassett.
At the beginning of a new matter,
lawyers often specify its scope and fees in an engagement letter. The
engagement letter is designed to clarify exactly what is included, and
excluded, from a particular matter.
Some states have specific
requirements for what must be included in an engagement letter, and some firms
have their own requirements as well. For example, in New York State, Part 1215
of the Joint Rules of the Appellate Division requires a letter of engagement in
most matters, except for certain exceptions listed in the rule (i.e., an
engagement letter is not required if the fee is expected to be $3,000 or
From a project management point of
view, there is considerable room for improvement in many engagement
letters. Consider, for example, this language from the sample letter of
engagement published by New York State:
Scope of representation
A claim, dispute or dealings with
relating to ______________.
All of our services in this matter
will end, unless otherwise agreed upon in a writing signed by us, when there is
a final agreement, settlement, decision or judgment by the court. Not
included within the scope of our representation are appeals from any judgments
or orders of the court. Appeals are subject to separate discussion and
negotiation between our firm and you. Also not included in the scope of
this agreement are services you may request of us in connection with any other
matter, action, or proceeding.
The rest of New York's two-page
sample focuses on fees and client rights. Fee options for the sample
include a flat fee, a contingency, or hourly rates.
If a law firm copied the New York
State sample exactly and negotiated a fixed fee, they might end up being very
sorry when the matter spiraled out of control. They would be better
protected if the engagement letter specified timelines and deliverables, such
as the maximum number of interviews, pleadings, interrogatories, opinions, and
reports, the anticipated scope of travel and research, the use of outside
consultants, and so on.
Could a lawyer possibly know in
advance how many depositions would be required to settle or plead a particular
case? Of course not. But he or she could specify the maximum number
of depositions they expected, and exactly what would be included within the
This failure to provide sufficient
detail is quite common. The Executive Director of one AmLaw 100 firm (who
preferred to remain anonymous) recently told us:
"The scope of work often contained
in our engagement letters is generally no more than one or two lines.
Lawyers are missing an opportunity to clearly specify the scope of what is
included in each matter, and what is not."
From the client perspective, better
specifying the work up front could lead to more predictable costs and a more
sophisticated understanding of what they are paying for. From the law
firm's point of view, it could reduce fee disputes, write-downs and
Entire textbooks have been written
on how to develop what project managers call a statement of work (SOW), which specifies what a particular
project includes and excludes. (For example, see Delivering Project Excellence with the Statement of Work by
Michael Martin.) Lawyers may wish to adapt some of these ideas and
write a SOW which could either be included in the engagement letter or be a
separate document, depending on the nature of the matter, the lawyer-client
relationship, and joint expectations.
more on the Legal Business Development Blog.