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Every time you want to decline to represent a prospective client, you should use a non-engagement letter. Otherwise, you risk the possibility that the prospective client could mistakenly think you're their attorney on a matter.
Send rejection letter. If taking on the client seems like too great of a risk, protect yourself by notifying the client in writing so there is no confusion about representation. Be polite but firm, and abundantly clear. Send the letter by certified mail and retain a copy for the firm's records.
Dear {Salutation}: In response to your request when you contacted this firm, I have reviewed the information you provided regarding possible representation in the matter of:________________. I appreciate the confidence you have expressed in our firm; however, the firm has decided not to represent you in this matter.
Letter 1. ... Thank you for allowing [firm] to represent you in the [describe] matter. ... Since I have not heard from you for the past [30 / 45] days, I now assume that you do not wish to retain me further or proceed with this matter. ... We have been working together since [date] to accomplish [subject matter].
The purpose of a non-engagement letter is to dispel any notion in the mind of the prospective client that you represent him or her. In the non-engagement letter: Advise the individual that you do not act for them and that you will not be taking any steps on their behalf.
Dear {Salutation}: In response to your request when you contacted this firm, I have reviewed the information you provided regarding possible representation in the matter of:________________. I appreciate the confidence you have expressed in our firm; however, the firm has decided not to represent you in this matter.
After you left our offices yesterday, we performed a formal conflict-of-interest check and found that our firm does indeed have a conflict of interest involving your intended adversary in this case, [Name]. Unfortunately, this conflict cannot be resolved in a manner that would allow us to represent you in this matter.