Engagement Agreement General Terms and Conditions
1. Scope of Our Engagement. Whenever you request our assistance on a discrete matter that may require us to render significant legal services, we will establish a separate matter for billing purposes. We will notify you whenever we establish a new matter. Although we often describe our role as one of “general counsel,” our engagement will be limited to the specific matters for which we establish matter numbers. Since we can only be aware of those matters you specifically bring to our attention, we are only responsible for those specific matters upon which you engage us. We will not represent you in a securities offering or other significant endeavor unless we establish a matter specifically for such representation.
In addition, by signing our engagement letter agreement, you acknowledge and agree that we do not represent you in connection with a litigation matter, or the filing, prosecution, monitoring or maintenance of any patent, trademark or copyright filing. You further acknowledge and agree that we will not calendar or otherwise remind you of any deadline or other obligation in connection with any matter, and you are solely responsible for calendaring such deadlines and obligations, even if you have advised us of such deadline or obligation. This includes not only any deadline or obligation relating to a litigation matter, patent, trademark or copyright filing, but also any other filing or timing obligation, such as a contractual deadline or expiration date (even where we may have represented you with respect to such contract) or the renewal of a Uniform Commercial Code or other financing statement.
When we render services to you, you acknowledge that we have relied upon you to supply us with the facts upon which we render them. You also acknowledge we have relied upon you to review all legal documents that we prepare for factual accuracy and completeness. You agree you are not relying on us for accounting, business, or investment decisions. You also agree we are not responsible for investigating the character or creditworthiness of any person with whom you might deal.
You agree we are not be responsible for the business or economic success of any transaction in which we represent you, as we cannot assure you that any transaction will be successfully consummated or will result in a favorable outcome to you. Finally, you understand and agree that the scope of our engagement does not include monitoring administrative, judicial, or legislative developments that may impact you or your business.
2. Multiple Party Representation. Although we may from time to time at your request assist shareholders, officers, directors, employees or agents, unless we have otherwise agreed in writing, for purposes of establishing the attorney-client relationship, only the party actually named in our engagement letter agreement is our client. In certain circumstances, we may be acting for an entity, and simultaneously on behalf of its founders or certain of its owners to the extent each has engaged us by execution of an engagement letter agreement applicable to the same matter. While the benefits of being jointly represented may be obvious to you, there are also several risks that you should consider carefully before continuing with such joint representation. The explicitness of what follows is motivated by our desire to maintain the highest ethical standards. The risks described in this section exist any time joint representation of two or more clients is undertaken by the same lawyers; nevertheless, these risks should be understood by you at the outset.
The first risk concerns the sharing of confidential information. As you may know, all communications between us and a client of our firm are treated as strictly confidential under the attorney-client privilege, and those communications cannot generally be disclosed to any third parties without your consent. If multiple parties are clients of our firm, each of the clients enjoy the same privilege with respect to your respective communications with us. You should be aware, however, that by jointly representing multiple parties in the same transaction, there is no privilege of confidentiality as between the jointly represented parties. Thus, for example, any communication to us by any one party, provided it relates to the subject matter of the joint representation, would be deemed received by the other parties, and vice versa.
This does not mean, of course, that we would mechanically repeat to any of the multiple parties everything that is confided to us by one of the parties. But it does mean that any of the multiple parties would generally have the right to find out what has been told to, or what has been advised by, us to the other parties, to the extent that such information relates exclusively to the joint representation. Our ethical obligations require us to adhere to this rule in order to ensure that we, as lawyers, can fulfill our fiduciary obligations to each of the multiple parties in full measure.
This also does not mean that anyone else (that is, any non-client) can gain access to such communications. Indeed, the privilege protecting the confidentiality of such communications would remain fully intact vis-a-vis third parties; additionally, none of the multiple parties would be able to waive that privilege without the other’s consent.
Nevertheless, if any party would consider imparting to us any information that it desired to keep secret from the other parties, we would not be able to maintain such secrecy to the extent that the information were exclusively related to the joint representation. If any party has such secrecy concerns, that party should consider obtaining separate counsel.
The second risk that arises out of any joint representation is the possibility that such joint representation could diminish the nature of the advocate relationship you have with us as your counsel. Under the Professional Rules of Conduct, we are required to provide all of our clients with a “vigorous” representation of their interests. Although we believe we will at all times provide advice to each of the parties based upon the highest ethical standards, it is possible that you may not believe you will obtain the same degree of “vigorous” representation when you are represented by the same attorney because there is a natural human tendency to “mediate” or “compromise” issues where one of you may be able to gain a more significant concession if you were to take a position adverse to the other.
A third risk that necessarily arises out of any joint representation is the theoretical possibility that an actual conflict of interests may one day surface between or among the multiple parties. For instance, facts could come to light which would suggest that one or more of such parties may desire to assert claims or take a position adverse to the others. And if such a conflict should arise, there would be two important consequences. First, our firm would be precluded from continuing its joint representation of the parties. Therefore, each party would be required to engage new, separate counsel in mid-stream at its own expense. In addition, our firm may represent one or more of the parties in matters unrelated to the joint representation. The existence of an actual dispute could create grounds for one of the parties to disqualify our firm from representing any of the others in those other matters that are unrelated to the joint representation. The specific grounds for such disqualification are hard to precisely predict in advance, but would most likely relate to the disclosure to us of information during the period of our joint representation that the disclosing party might consider to be confidential. By executing and returning a copy of our engagement letter agreement, you specifically agree on behalf of all of the jointly represented parties to our continued representation of any of them in matters that are unrelated to the joint representation, and further agrees that you will not seek to disqualify our firm from such representation on the basis of any information which any of them had previously provided to our firm, or otherwise.
The second important consequence of a conflict among multiple parties is that none of them could thereafter prevent any of the others from discovering or disclosing confidential attorney-client information that relates exclusively to the joint representation communicated during the period of the joint representation (at least insofar as such information is sought to be used in connection with the newly-discovered dispute between or among them). Thus, confidential communications made by any of the multiple parties to us as joint counsel may, at least theoretically, one day come back to “haunt” you in the context of a dispute among yourselves.
Please understand that none of the foregoing is said for the purpose of causing you undue concern. The risks outlined above are inherent in any joint representation undertaken by any lawyer.
3. Equity Disclosure. In connection with our engagement, you may have agreed to grant equity consideration to us or one of our affiliates, or we or one of our affiliates may invest in your company. In connection therewith, we advise you, and you acknowledge as follows:
(a) Rule 3-300 of the California Rules of Professional Conduct governing attorneys provides that: A member shall not enter into a business transaction with a client; or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client, unless each of the following requirements has been satisfied:
(1) The transaction or acquisition and its terms are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which should reasonably have been understood by the client; and
(2) The client is advised in writing that the client may seek the advice of an independent lawyer of the client’s choice and is given a reasonable opportunity to seek that advice; and
(3) The client thereafter consents in writing to the terms of the transaction or the terms of the acquisition.
(b) You have allowed us to invest, or have agreed to grant us an equity interest in consideration of our agreement to agree to some alternative billing arrangement, as described in our engagement letter agreement with you. You acknowledge that the equity may have a value substantially in excess of the cost to us of agreeing to an alternative billing arrangement; and that we have agreed to bear the risk that the equity will not be worth the costs and risks to us of agreeing to an alternative billing arrangement.
(c) You understand that the benefit you are receiving may be worth less than the value of the equity.
(d) We have advised you to consult with independent counsel to review your objectives and to advise you whether it was in your interests to grant the equity.
(e) We have advised you that the grant of the equity may have certain accounting consequences, and we advised you to consult with your accounting advisors prior to the grant of the equity.
4. Billing. Please note that as a matter of practice we evaluate our billable rates annually, and our rates may thus be changed in the future, in which case the new rates will apply to all work performed after your receipt of written notice of such rate changes.
You will receive an invoice from us each month for the fees, expenses, and charges incurred in rendering legal services to you. Each invoice will contain a concise summary of each task performed and expense and charge incurred on your behalf during the preceding month. Unless we have otherwise agreed in writing, payment of each invoice is due upon receipt.
5. Retainer. From time to time before undertaking to perform any discrete legal services for you, we reserve the right to request a retainer or that an existing retainer be replenished or increased. We will place any such retainer in our trust account and apply our fees, expenses, and charges for any services that we perform for you against it. A retainer may be applied against any open matter for you, even if we request the retainer in connection with a specific matter.
6. Delinquency. If you do not pay an invoice within 30 days after the date of the invoice, we may declare your account delinquent. If we declare your account delinquent, we may immediately discontinue rendering legal services to you. We also may charge you interest on all amounts owed to us at a rate of 10% per annum compounded annually from the date that we notify you that we have declared your account delinquent until you pay such amounts, provided that such interest rate may not exceed the maximum rate permitted by applicable law. If your account is delinquent, any payments that you make will be applied first to any accrued interest and then to amounts owed under the outstanding invoices in chronological order. If we declare your account delinquent, you also will reimburse us for any expenses that we incur in collecting your account, including attorneys’ fees.
7. Engagement of Experts. From time to time, after obtaining your advance consent, we may engage various experts on your behalf in the course of our representation of you, including other attorneys with legal specialties outside of our core areas of practice. Such an arrangement may protect the services that such experts perform under the attorney work-product doctrine. If we engage any such experts, you will rely solely on them with respect to their advice, and will remain primarily responsible for paying their fees and expenses.
8. Other Clients. You understand that from time to time we may represent persons who compete either directly or indirectly against you and you consent to such representation. In any such case, we assure you that no information that you have communicated to us confidentially will be used for the benefit of any competitor. Nevertheless, absent an effective conflicts waiver, conflicts of interest may arise that could adversely affect your ability and the ability of other of our clients in pending or future matters to continue to use our services. Given that possibility, we wish to be fair not only to you, but to our other clients as well. Accordingly, by signing our engagement letter agreement, you confirm our mutual agreement that we may represent other present or future parties on matters other than those for which we had been or then are engaged by you, whether or not on a basis adverse to you or any of your affiliates, including in any advisory capacity or any business transaction, all of which are referred to here as “Permitted Representation”. In furtherance of this mutual agreement, you agree that you will not for yourself or any other party, and you will not permit an affiliated party to, assert our representation of you, either previously, in our then existing representation, or in any other matter in which you may retain us, as a basis for disqualifying us from representing another party in any Permitted Representation and you agree that any Permitted Representation does not constitute a breach of duty. Permitted Representation would include, without limitation, representing a client over which you or your affiliates might be seeking to acquire influence or control, or from which you or your affiliates may wish to buy assets, or representing a client regarding its interest at the time in acquiring influence or control over an entity in which you or your affiliates have a similar interest.
Additionally, our representation of you is premised on our adherence to our professional obligation not to disclose any confidential information or to use it for another party’s benefit without your consent. Provided that we act in this manner, you would not for yourself or any other party, and you will not permit an affiliate party to, assert our possession of such information, even though it may relate to a matter for which we are representing another client or may be known to someone at our firm working on the matter, (a) as a basis for disqualifying us from representing another of our clients in any matter in which you or any other party has an interest, or (b) constitutes a breach of any duty owed by us.
By signing an engagement letter agreement and agreeing to these General Terms and Conditions, you are expressly agreeing to the waivers identified above. The foregoing will not supersede or cancel any prior conflict waivers issued to us, all of which will remain in full force and effect.
9. Termination. Our relationship with you is subject to termination by either you or us at any time for any reason. Upon such termination, we will bill you for all unpaid fees, expenses, and charges previously performed and you will pay such bill promptly upon receipt. You also will promptly execute and deliver to us any documents required to permit us to withdraw from representing you. In addition, we reserve the right to decline to represent you on any project on which you request us to provide legal services. If on December 31 of any calendar year we have not provided substantive legal services to you during the previous 12 months, both you and we consider our representation of you to have been terminated. Should we subsequently be asked to render additional services, and in the event we do so without executing a new engagement letter agreement, we shall be deemed to have re-established our relationship with you pursuant to the terms of our original engagement letter agreement.
10. Errors and Omissions Insurance. As is required by California Business and Professions Code Sections 6147 and 6148, Stubbs Alderton & Markiles, LLP hereby advises you that the law firm maintains errors and omissions insurance coverage applicable to the services to be rendered.
11. Publicity. Unless you have advised us otherwise in writing, you agree that we may use your name and logo on our web site (including a link to the home page of your web site) and in our marketing materials solely for the limited purpose of referring to you as a client of our firm.
12. Miscellaneous. Our engagement and all of our agreements with you are governed by California law and our engagement letter agreement and these General Terms and Conditions are intended to be our entire agreement for rendering professional services and can be amended or modified only in writing; provided, we may post changes to these General Terms and Conditions on our website, and your continued use of our services constitutes your agreement to such changes. Our engagement letter agreement binds each party signing it whether or not any other proposed signatory ever executes it. If any provision of our engagement letter or these terms or the application thereof is held invalid or unenforceable, the invalidity or unenforceability shall not affect other provisions or applications of our engagement letter agreement or these terms which can be given effect without such provisions or application, and to this end the provisions of our engagement letter and these terms are severable. Except as expressly set forth in our engagement letter, the failure by either party to assert any right or remedy under our engagement letter or otherwise or to act in the event of any breach will not operate or be construed as a waiver of any rights or remedies such party may have under our engagement letter agreement, these terms or otherwise.