In American Resource Technologies, Inc. v. Oden, Civil Action No. 3:13-CV-04419-B, 2014 WL 6884243 (N.D. Tex. Dec. 8, 2014), the court held that a lawyer cannot always withdraw from a case when a client fails to pay fees and costs owed to the lawyer. In this case, the plaintiffs’ lawyers moved to withdraw under Rule 1.15(b), which permits withdrawal if either: “the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services, including an obligation to pay the lawyer’s fee as agreed…” or “the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client.” The lawyers in American Resource claimed that the client had failed to pay $992 in fees and $354 in litigation costs, and that they had failed to replenish the $500 retainer for future costs, thus breaching the representation agreement. However, the court found that it was not clear that the $992 in unpaid fees were related to the representation agreement because the lawyers conceded that they were being paid on a contingency basis. Moreover, the $354 in unpaid costs were for a single deposition. The court found that, under these circumstances, the lawyers had not shown that the clients had failed “substantially to fulfill” their obligations under the representation agreement.
The court further held that there was no showing that the unpaid fees and costs were “an unreasonable financial burden on” the lawyers. In fact, the lawyers had conceded that the clients owed “relatively minimal amounts at present.” The lawyers argued that they had “serious concerns about being forced to front costs for the entire litigation.” But the court held that: “[Lawyers] cannot back out of this litigation based on a mere concern. To allow otherwise would go against the policy that a lawyer who agrees to represent a client is generally ‘expected to work through the completion of a case.’” Thus, the court found that the lawyers had not established good cause to withdraw.
The court also held that the withdrawal could be denied because 1) lawyers failed to show that the withdrawal would not have a “material adverse effect on the interests of the client; and 2) “unnecessary delay, prejudice, [and] interference with justice” would be caused by such withdrawal. The clients were corporations and thus, could not represent themselves and there was no known succeeding lawyer lined up for them. In addition, the case had been ongoing for over a year. Thus, assuming the clients could obtain new counsel, withdrawal would necessitate the extension of many deadlines. And if the clients could not obtain new counsel, they would suffer substantial prejudice.
The court also discussed the “interests of justice” and noted that even if the clients had failed to pay “the minor fees and costs asserted,” the lawyers could still possibly recover “significant sums” under their contingency arrangement. The court also stated that to allow withdrawal based on “unsubstantial” unpaid fees and costs at a time when the contingency agreement “may look less fruitful than it once appeared,” would be against the policy that a lawyer is expected to work to the completion of a case. In conclusion, a client’s minor breach of the representation agreement is not a sufficient excuse for the lawyer to withdraw from a contingency case a year into the litigation.