Sorted by Commenter - Ethics - State of California
Sorted by Commenter - Ethics - State of California
Sorted by Commenter - Ethics - State of California
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RRC – Rule 1.5 [4-200]<br />
E-mails, etc. – Revised (6/1/2010)<br />
examination <strong>of</strong> leading authority reveals that only "true retainers" are nonrefundable—and<br />
these are very, very rare.<br />
Governing Rule<br />
When a client discharges an attorney, the Rules <strong>of</strong> Pr<strong>of</strong>essional Conduct require the<br />
attorney to "[p]romptly refund any part <strong>of</strong> a fee paid in advance that has not been earned."<br />
The rules also state that a refund is unnecessary if the money is "a true retainer fee ... paid<br />
solely for the purpose <strong>of</strong> ensuring the availability <strong>of</strong> the member for the matter." (Rule 3-<br />
700(D)(2).) That is, money advanced <strong>by</strong> a client but not earned <strong>by</strong> the lawyer must be<br />
refunded, unless it constitutes a true retainer.<br />
Why is it crucial to understand the difference? Improper retention <strong>of</strong> client funds can result<br />
in discipline, even disbarment. Moreover, an attorney may face civil liability for breach <strong>of</strong><br />
fiduciary duty, which may be determined as a matter <strong>of</strong> law based on a breach <strong>of</strong> the rules<br />
<strong>of</strong> pr<strong>of</strong>essional conduct which "help define the duty component <strong>of</strong> the fiduciary duty which<br />
an attorney owes to his [or her] client." (Stanley v. Richmond, 35 Cal. App. 4th 1070, 1086<br />
(1995).) Avoiding these consequences depends on accurately structuring the attorney-client<br />
relationship.<br />
Retainer Problems<br />
The <strong>State</strong> Bar addressed the issue <strong>of</strong> retainers in Arbitration Advisory Opinion 01-02<br />
(calbar.ca. gov/state/calbar/calbar_generic.jsp?cid =11337&id=6493). The opinion states<br />
that "unless the attorney and client have contracted for a 'true retainer' (also known as a<br />
'classic retainer'), the attorney must refund any portion <strong>of</strong> the advance fee that the attorney<br />
has not yet earned."<br />
The key characteristic <strong>of</strong> a true retainer is that it is paid solely to secure the availability <strong>of</strong><br />
the attorney over a given period <strong>of</strong> time and is not paid for the performance <strong>of</strong> any other<br />
services. When a valid true retainer exists, if the attorney's services are eventually needed,<br />
those services are billed and paid for separately, and no part <strong>of</strong> the retainer is applied to<br />
pay for them. Thus, any fee arrangement in which the attorney bills against the retainer is<br />
not a true retainer.<br />
As explained in Advisory Opinion 01-02, a true retainer may be nonrefundable because it<br />
takes the attorney out <strong>of</strong> the marketplace and precludes him or her from undertaking other<br />
work. Such an arrangement requires that the attorney be generally available for<br />
consultation and legal services to the client. A true retainer may be a single, up-front<br />
payment to guarantee that the attorney will be available for a specified period <strong>of</strong> time, or it<br />
may be a recurring payment, where, for example, the client pays a monthly fee solely to<br />
ensure the attorney's availability to represent the client for that month.<br />
Scarcer than Hen's Teeth<br />
Although true retainers once were common, the <strong>State</strong> Bar does not contemplate many<br />
appropriate situations for them today. In fact, Opinion 01-02 speculates that there are<br />
probably only a handful <strong>of</strong> situations in which a client would want to pay a true retainer.<br />
Such an arrangement may be appropriate to secure the availability <strong>of</strong> an attorney whose<br />
reputation could cause a threatened lawsuit to vanish. In addition, a true retainer may be a<br />
reasonable way to ensure that an especially talented attorney is available to handle a<br />
matter; it may also be used to prevent the attorney from representing an adverse party. The<br />
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -126-<br />
Printed: June 2, 2010