Sample Form of Engagement Letter
(Consent to Multiple Representation of Initial
Investors in Organizing an LLC
and Acting as its Counsel)
[PLEASE NOTE: UNLESS YOU HAVE HAD SUFFICIENT
EXPERIENCE WITH THIS FORM THAT YOU ARE CONFIDENT
OF YOUR ABILITY TO COMPLETE IT PROPERLY, PLEASE RUN A
DRAFT BY XXX BEFORE FINALIZING THE LETTER]
[Date]
[Names and Addresses of Clients]
Dear _______________:
We are pleased that you have requested that XXX (the “Firm”) represent ► both
► all of you in organizing a new limited liability company (the “Company”) for the
purpose of engaging in [Description of new LLC’s intended business]. You have also
requested that the Firm serve as counsel to the Company following its organization. In
that capacity, we will advise and represent the Company in connection with such matters
as any authorized officer or employee of the Company may request and we may agree
from time to time.
We submit for your approval the following provisions governing our engagement,
as well as the additional provisions set forth on the enclosed “General Provisions
Relating to Relationships with Clients” (the “General Provisions”). If you have any
questions about any of these provisions, or if you would like to discuss possible
modifications, please call me.
1.
Identity of Client. Once the Company has been organized, the Firm’s
client, for purposes of this representation, will be the Company, and not any of its
promoters, organizers, members, managers, employees, subsidiaries, parents, other
affiliates, insureds or insurers. [This means that we will not have a conflict of interest
if we represent other clients in matters in which they are adverse to parties having
any of the specified relationships with the Company.]
In representing the Company after completion of its organization, we will act in
accordance with the directions of the person or persons whom we believe to be
authorized under the Company’s [articles/certificate] of [organization/formation] and
[operating/limited liability company] agreement to act with respect to the subject
matter of such directions.
Law Firm 6
2.
Fees and Expenses. Our fees will be based on the amount of time spent by
our lawyers and paralegals on the Company’s behalf. Each lawyer and paralegal in our
Firm has a standard hourly billing rate, and the applicable rate times the number of hours
spent by each lawyer or paralegal, measured in tenths of an hour, will be the initial basis
for determining our fees. Our standard billing rates currently range from $XXX to $XXX
per hour for lawyers and $XXX to $XXX per hour for paralegals.
[Alternate—Fixed Fee for Organization of LLC]
2.
Fees and Expenses. Our fee for the organization of the Company, which
is limited to the preparation of and advice concerning the terms and provisions of articles
[a certificate] of [organization/formation] and [an operating/a limited liability
company] agreement [___________________] and advice concerning compliance with
federal and state securities laws (if appropriate in the circumstances), will be
$____________. Fees for additional services rendered after organization of the Company
will be based on the amount of time spent by our lawyers and paralegals on the
Company’s behalf. Each lawyer and paralegal in the Firm has a standard hourly billing
rate, and the applicable rate times the number of hours spent by each lawyer or paralegal,
measured in tenths of an hour, will be the initial basis for determining our fees. Our
standard billing rates currently range from $XXX to $XXX per hour for lawyers and
$XXX to $XXX per hour for paralegals.
[Include in All Letters]
In addition to our fees, we will be entitled to payment or reimbursement for costs
and expenses as set forth in the General Provisions.
If you have any questions or concerns about any of our statements for fees and
expenses, please call me promptly so that we can discuss your questions or concerns and
I can respond appropriately.
[Optional (but inclusion is encouraged)]
Your signatures on the enclosed copy of this letter will confirm that you will be
jointly and severally liable for payment when due of all of our fees for services and costs
and expenses in connection with the organization of the Company and that you jointly
and severally, and unconditionally, guarantee payment when due of all of our fees for
services rendered to, and costs and expenses incurred on behalf of, the Company after its
organization.
[Include in All Letters]
3.
Staffing. Although [I/name of lawyer to be primarily responsible] will
be primarily responsible for this engagement, various portions of the work may be
delegated to other members of the Firm, associate, staff, and of counsel lawyers, and
paralegals, as the Firm deems appropriate in the circumstances. [Include one or the
other of the following sentences: The current standard hourly billing rate for [my
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time/the time of ___________] is $______ per hour. /The names and current
standard hourly billing rates of the lawyers we expect will work on this matter are
listed on the attached Schedule A.]
[Include in All Letters]
4.
Professional Responsibility Issues.
(a)
Applicable Rules. The discussion in this paragraph 4(a) and
paragraph 4(b), below, relates solely to our representation of ► both ► all of you in
connection with the organization of the Company. Once the Company’s organization has
been completed, the joint representation will end and our sole client with respect to
matters involving the Company will be the Company. In order for us to represent ► both
► all of you, certain ethical requirements, relating to conflicts of interest and common
representation of multiple clients, must be met.
A lawyer has the duty to exercise independent professional judgment on behalf of
each client. When a lawyer is requested to represent multiple clients in the same matter,
he or she may not do so unless (i) the lawyer reasonably believes that he or she will be
able to provide competent and diligent representation to each affected client and (ii) each
client gives informed consent, confirmed in writing. To be “informed,” each client’s
consent must be preceded by the lawyer’s communication of adequate information and
explanation about the material risks of and reasonably available alternatives to the joint
representation.
(b)
Relevant Considerations. I have advised each of you of your right
to obtain separate legal counsel to represent you in all matters relating to the organization
of the Company. I also have discussed with each of you the advantages of joint
representation, which in this matter are the probable savings in legal fees and expenses
[and __________________]. Based on the information you have provided, we have
concluded that we can represent each of you competently and diligently. In determining
whether you should consent to this joint representation, however, you should carefully
consider the following:
The first matter is that of the attorney-client privilege. Although the law is not
settled, under the prevailing rule, any information disclosed by ►either ►any of you to
us in connection with this representation would not be protected by the attorney-client
privilege in a subsequent legal proceeding initiated by or against one of you and
involving ►the other ► another of you or the Company. If we are to represent you, it
will only be on the express understanding that each of you has waived the attorney-client
privilege to the extent, but only to the extent, that the privilege might otherwise require us
to refrain from disclosing, in connection with any subsequent legal proceeding initiated
by or against one of you and involving ►the other ► another of you or the Company,
information disclosed to us by ►either ►any of you in the course of this representation.
Moreover, we believe we cannot effectively represent each of you if information
disclosed to us by one of you must be preserved by us in confidence from the other ►s or
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the Company, and, accordingly, we will disclose to ► both ► all of you and to the
Company all information we receive from any of you relating to our representation of
you in connection with the formation of the Company. If ►either ►any of you insists
that we keep any such information confidential, we will be forced to withdraw from the
representation.
Secondly, although at this time there does not appear to be any difference of
opinion between [any of] you with regard to the major legal issues involved in organizing
the Company, it may well turn out, upon further consultation, that you have varying
opinions with respect to the Company’s capitalization and other organizational matters.
Issues about which you may disagree include the appropriateness of the selection of the
limited liability company form to operate the contemplated business, the amount and type
of membership interests to be issued, terms of any loans or leases of property to the
Company by its members or managers, debt-equity ratio, salaries and fringe benefits,
management responsibilities, restrictions on the sale or other transfer of interests,
circumstances under which a member’s interest may or must be purchased by the
Company or other members, tax elections, and selection of the Company’s fiscal year. It
is our duty to explore each of these issues with you, but we will not be able to play the
partisan role normally expected of a lawyer who represents only one party to a matter.
As a result, you will be required to assume greater decision-making responsibility than
you would if each of you was separately represented. Should we determine that there are
material differences ►between ►among you on one or more of these issues that you
cannot resolve on an amicable basis, or that we conclude cannot be resolved on terms
compatible with the best interests of each party involved, then we must withdraw from
the joint representation. We also must withdraw from the joint representation if ►either
►any of you so requests. Upon withdrawal from the joint representation (for either
reason) we will not be able to continue to represent ►either ►any of you in this matter
except, perhaps, with the consent of ►both ►all of you. If we are required to withdraw,
we will, if you wish, assist each of you in obtaining new counsel in this matter. You
would, of course, be responsible for payment of all our accrued legal fees and any
outstanding expenses we have advanced on your behalf.
Third, in the event of litigation involving the interpretation of any document
which we might draft in connection with the organization of the Company, we would not
be able to represent ► either ► any of you in that particular proceeding.
[Fourth, as you know, the Firm has represented ► in other legal matters.
Although we do not think that this prior representation will, in any material fashion,
affect our ability to represent each of you on an impartial basis, you must understand that
this prior representation may unconsciously bias us in favor of ► in the event of any
disagreement ►between ► among you. Should we at any time determine that such a
bias exists, then the Firm must withdraw from the joint representation and will not be
able to continue to represent ► either ►any of you in this matter except, perhaps, with
the consent of ►both ►all of you.]
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[The fifth matter is that of ultimately allocating our fees, disbursements, and so
forth. Unless we receive joint instructions to the contrary, we will send our entire bill for
fees and disbursements for organizing the Company to ►. However, to reiterate, we
cannot provide advice to ►either ►any of you in connection with any claim you may
possess or desire to assert against the other ►s for indemnity or reimbursement of fees
and disbursements billed by us in connection with this representation.]
Your signatures on and return of the enclosed copy of this letter will confirm your
consent to the Firm’s joint representation of ► both ► all of you in connection with the
organization of the Company.
[Optional (use only when applicable)]
We understand that each of you has retained separate counsel to advise you
regarding issues relating to the organization of the Company. Messrs. ► and ► have
retained ►, Messrs. ► and ► have retained ►, and Mr. ► has retained ►. Your
separate counsel will review the organizational documents we draft and advise you
concerning those documents. The Firm will not advise you individually regarding those
documents or any issue relating to the organization of the Company. As noted above,
once the Company’s organization has been completed, it will be our sole client in matters
involving the Company, so the Firm will not advise you individually with regard to such
matters, either.
[Optional (but inclusion is encouraged unless you believe the risk of a material
adverse effect on our relationship with the client outweighs the likely benefit of a
waiver of future conflicts)—Waiver of Future Conflicts]
(c)
Conflicts of Interest. The Firm represents many other clients, and
some of our present and future clients may have disputes, transactions or other business
with the Company during the time that we are representing the Company. The Firm will
be precluded , however, from (i) representing, in any matter that is the same as or
substantially related to any matter in connection with which we have represented or are
representing the Company, any other client whose interest in such matter is directly or
materially adverse to the Company’s interest; or (ii) using any information relating to our
representation of the Company to the disadvantage of the Company, except as permitted
by applicable rules of professional conduct. Except as provided in the preceding
sentence, the Firm will have the right to continue to represent or to undertake to represent
existing or new clients in matters in which the interests of such clients are adverse to the
interests of the Company, including litigation, transactional and other matters in which
the Company is a party or is otherwise interested.
Without limiting the generality of the foregoing, [Include if the Company is a
bank: we will have the right to represent present and future clients in connection
with the negotiation and documentation of loans from the Company,] we will have
the right to represent debtors or other creditors in bankruptcy, workout and other debtorcreditor matters in which the Company is a creditor, and we will have the right to
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represent other clients who are defendants or potentially responsible parties or are
otherwise interested in federal and state Superfund and other environmental matters
(including but not limited to litigation, administrative proceedings, alternative dispute
resolution proceedings and private negotiations) in which the Company also is a
defendant or potentially responsible party or otherwise has interests actually or
potentially adverse to those of our other client.
Parties who are adverse to the Company in matters in which we represent the
Company may, from time to time, seek to retain us to represent them in unrelated matters.
We will have the right to represent any such party so long as the matter in which we
represent it is not substantially related to any matter in which we represent the Company
and we believe that the representation of such party will not adversely affect our
relationship with the Company.
Your signatures on and return of the enclosed copy of this letter will constitute the
Company’s consent to any and all representations permitted by the terms of this Section 4
and waiver of any conflicts of interest inherent in any such representations. You should
know that, in engagement letters with many of our other clients, we have requested
similar consents in order to preserve our ability to represent the Company.
[If, notwithstanding the Company’s consent, the Firm concludes that it
cannot or should not continue to represent the Company while also representing
another client in one or more matters in which it is adverse to the Company or any
of its affiliates, insureds or insurers, the Firm will have the right to withdraw
immediately from its representation of the Company. The Company acknowledges
that the Firm’s withdrawal in such circumstances will not breach any duty of
loyalty or other duty of the Firm to the Company. If the Firm exercises its right to
withdraw, the Company immediately will become a “former client” of the Firm for
purposes of applicable rules of professional conduct.]
[Alternate Section 4(c): If you do not choose to include Optional Section
4(c), you must include the following, at least in the first draft presented to the
client.]
(c)
Representation of Other Clients. Your signatures on and return of
the enclosed copy of this letter will constitute the Company's consent to the Firm
representing [Include if the Company is a bank: other clients in connection with the
negotiation and documentation of loans from the Company and other transactions
in the ordinary course of the Company’s business,] debtors or other creditors in
bankruptcy, workout and other debtor-creditor matters in which the Company is a
creditor and other clients who are defendants or potentially responsible parties or are
otherwise interested in federal and state Superfund and other environmental matters
(including but not limited to litigation, administrative proceedings, alternative dispute
resolution proceedings and private negotiations) in which the Company also is a
defendant or potentially responsible party or otherwise has interests actually or
potentially adverse to those of our other client, except that this consent will not apply to
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any representation of another client in a matter that is the same as or substantially related
to a matter in which we have represented or are representing the Company. This consent
applies with respect to both present and future clients of the Firm.
[Optional—Retainer to be Applied to Fees]
5.
Retainer. This will acknowledge receipt of a check for $_________ as an
advance against statements to be rendered for fees and expenses in connection with our
representation. Such advance will be deposited in our general trust account and we will
charge our fees and expenses against the advance and credit them on our billing
statements. In the event our fees exceed the advance deposited with us, we will bill you
(or, if it is in existence, the Company) for the excess. Any unused portion of the advance
will be refundable at the conclusion of our representation. You agree, on your own
behalf and on behalf of the Company, that we will have the right to request additional
advances from time to time based on our estimates of future work to be undertaken, and
that either you or the Company will pay promptly any additional advance requested.
[Alternate—Security for Fees and Costs]
5.
Retainer. This will acknowledge receipt of a check for $_________ as
security for our fees for services and costs and expenses incurred in connection with our
representation. This amount will be held in our general trust account and may be applied
by us to any amount that is billed and not timely paid. If it appears, at any time during
the course of our representation of the Company, that our future fees and expenses will
exceed $__________, we will have the right to request a further deposit and the
Company will promptly pay the amount requested.
[Alternate—Advance for Expenses]
5.
Advance for Expenses. This will acknowledge receipt of a check in the
amount of $__________ as an advance against expenses. We will have the right to apply
the advance to expenses as incurred without any further authorization from you or the
Company.
[Include in All Letters]
*
*
*
If the foregoing correctly reflects your understanding of the terms and conditions
of our representation, please indicate your acceptance, both on your own behalf and on
behalf of the Company, by executing the enclosed copy of this letter in the space
provided below and returning it to our office.
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We are pleased to have this opportunity to be of service and to work with you.
Very truly yours,
XXX
By:
[Name of signing lawyer]
We, individually and on behalf of the Company named in the foregoing letter,
agree to and accept the terms and conditions set forth in the foregoing letter and the
enclosed General Provisions[, including, without limitation, the guarantee of payment
of fees, costs and expenses contained in said letter].
Date:
Date:
Date:
Date:
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