We were recently surprised by a client's statement she thought that a retainer is non-refundable. Our response was easy. The Massachusetts rules that govern the practice of law make clear that non-refundable retainer is an oxymoron. Retainers are advance payments that may be used to fund future services, with any unused portion refunded to the client. Isn't this something that lawyers have known for decades? Maybe not.
Lawyers Weekly recently reported that an attorney represented a criminal defendant and lost big when the client sued for what he alleged was an over charging: $120,000.00 for a case that resulted in a continuance without a finding. While the lawyer tried to characterize his initial $40,000.00 fee as part of the larger "flat fee", the judge whose jury found in favor of the client, re-branded the payment as a non-refundable retainer. The result: a $90,000.00 finding of unreasonable fee, tripled for consumer protection violation, and inflated to nearly a half million dollars, with accrued interest.
What was he thinking? The fundamentals of a retainer are long-known. While this already suspended lawyer may not be a reasonable measure of normal, we have to wonder how many lawyers engage in unethical billing practices because they do not know better? Even worse, are there some who do it purposefully because of the long odds of being caught?
There is nothing wrong with a retainer. If properly explained, it provides client commitment, a certain level of security and cash flow reliability in a field where "what have you done for me lately?" is a common lament. We use small retainers to fund work that occurs outside of our divorce mediation sessions, such as session summaries and agreement drafting. We explain how they work to clients up-front, and no one has yet declined.
The recent case tells us that all we need to be even better at explaining our retainer practices. For firms in which large retainers are the norm, this need is magnified. In divorce and family law, all new clients share some level of vulnerability, and many are prone to re-interpret their relationship with counsel when the need for services abates, especially if the results have been disappointing (as they often are). Ethics and fairness aside, our reputations and ability to earn a living depend on it.