Monday, October 7, 2013

Illinois Supreme Court finds "advanced payment retainers" can't be used in divorce case

Back in 2007, in a case called Dowling v. Chicago Options Associates, the Illinois Supreme Court recognized something it called an “advance payment retainer” which would allow a client to give a lawyer money the client wanted to keep away from the client’s creditors. The idea behind the concept was to protect a client’s ability to pay for legal representation, but as applied in that particular case and as explained by the court, the concept makes no sense and inevitably results in a violation of other rules of professional conduct.

Surprisingly, however, even though it makes little sense, the concept of the advanced payment retainer had not been challenged before the court until this year. This new case (In re Marriage of Earlywine) involved a divorce where the husband asked his lawyer to keep a certain amount of money so that the husband would not have to contribute to pay for the wife’s legal representation as determined by a specific statute. The statute was created to level the playing field in divorce cases by requiring a spouse with access to independent funds to help the other spouse pay for representation.

In Earlywine, the husband did not want to share his funds with his wife who was indigent. In an attempt to prevent her from getting access to the money, the husband gave the money to his attorney as an advanced payment retainer.

The court did not overrule Dowling, however, and simply ruled that the use of an advance payment retainer to protect a client’s funds from the obligation to share under the domestic relations act undermines the purpose of the statute in leveling the playing field which would render the act a nullity. The court found that it was “clear from the attorney-client agreement that the advance payment retainer in this case was set up specifically to circumvent the “leveling of the playing field” rules set forth in the Act. To allow attorney fees to be shielded in this manner would directly undermine the policies set forth above and would strip the statute of its power. If we were to accept [the husband’s] argument, an economically advantaged spouse could obtain an unfair advantage in any dissolution case simply by stockpiling funds in an advance payment retainer held by his or her attorney.” 

This makes sense to me and I think the decision reached the correct result. You can read the full opinion here.  What the court failed to accept, however, is that the same thing could have been said about the conduct of the client in Dowling. Although the court reached the correct result in this case, it should have taken the chance to get rid of the problem it created with its decision in Dowling.

As it is, an advanced payment retainer refers to money that belongs to the attorney, even though it is not actually earned until the work is performed. How it can be earned and not earned at the same time is a mystery. And if it is owned by the attorney, but not earned and thus owed to the client if not used, how can the attorney deposit it in either the general account or the trust account without commingling?