Wednesday, March 4, 2009

Non refundable fees

There have been a few recent reports on the issue of whether attorneys can use non-refundable retainers. For example, a little over a month ago, the Ohio Supreme Court decided in Cuyahoga County Bar Ass'n v. Cook, Ohio, to impose a six-month suspension on a lawyer who charged his client a nonrefundable flat fee to represent her in a foreclosure matter. In a per curiam opinion, the court reaffirmed its view that “earned-upon-receipt retainers” are unethical unless they are true general retainers that secure the services of a particular attorney whose services may be needed in the future.

What is important here is the distinction between retainers and fees. Traditionally, the term retainer is used to refer to an agreement where the client agrees to pay a certain amount for the agreement on the part of the attorney to become the client's lawyer. That's it. The client pays for, so to speak, the right to say Lawyer X is my lawyer. Lawyer takes the money in exchance of a promise to be the lawyer for the client -- which implies to be available to the client to perform the client's work. Some say the retainer, therefore, buys "availability"; others say the retainer buys "the lawyer's name." Any way you look at it, this retainer (sometimes referred to as a general retainer), is earned the moment the agreement is reached. Thus, in most jurisdiction it can be non refundable.

What can't be non-refundable is the fee charged to perform a certain task. Why? Because if the task is not performed, then the attorney would be violating a basic principle of professional responsibility: "no money for nothing." For a fee to be reasonable under the rules, it must be for something. It must buy something. The retainer "buys" availability or the right to say someone is my lawyer. The fee buys work. If there is no work, the fee is unearned and if it is unearned the lawyer can't keep it.

No comments:

Post a Comment