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 />
arrangement collapses and loses its status as a true retainer no matter what the fee<br />
agreement says.<br />
Alternative Fee Agreements<br />
Many clients wish to avoid hourly billing rates and prefer to pay a flat fee. Such an<br />
arrangement can be valuable to clients who want to avoid surprise bills and stay within a<br />
budget. Attorneys who perform work for a flat fee should be careful in how they structure<br />
the client relationship so as to comply with the rules governing true retainers.<br />
A flat fee is not necessarily a true retainer; in fact, based on <strong>State</strong> Bar Opinion 01-02, in a<br />
true retainer situation attorney services (as opposed to availability) would be charged to the<br />
client separately, and no part <strong>of</strong> the retainer would be applied to pay for actual services. A<br />
flat fee for services may be acceptable if it is tied to the accomplishment <strong>of</strong> a specific<br />
milestone and refunded if the milestone is not reached.<br />
For example, to form a limited liability company a lawyer may charge a flat fee <strong>of</strong> $1,000<br />
that is advanced <strong>by</strong> the client; the parties may stipulate that the fee is earned after the<br />
attorney files articles <strong>of</strong> organization and delivers the completed operating agreement to the<br />
client. Under these circumstances, the fee should be deposited in the attorney's trust<br />
account. If the attorney does not complete the specified tasks, the fee has not been earned<br />
and must be refunded.<br />
A well-drafted flat fee agreement should state exactly what services will be performed and<br />
when the fee is considered earned. If several services are involved, a portion <strong>of</strong> the fee<br />
should be earned after each service is completed. Not only is this fair to both parties, but it<br />
also avoids confusion if the attorney's services are terminated short <strong>of</strong> the final milestone.<br />
For clients who seek to economize, there are alternatives to the flat fee. For example, an<br />
attorney may choose to bill the client <strong>by</strong> the hour but cap the fee at a specific amount within<br />
the client's budget.<br />
In large part, the true retainer seems to be a vestige <strong>of</strong> days gone <strong>by</strong>. Today it is rarely<br />
used correctly, although many attorneys continue to insist on collecting nonrefundable<br />
retainers. Such agreements are risky and must be structured carefully.<br />
Not only must a nonrefundable retainer fit within the narrow definition <strong>of</strong> a true retainer, it<br />
also must be appropriate to the client's situation. The <strong>State</strong> Bar will scrutinize the<br />
arrangement to determine whether the fee is unconscionable—that is, if a client receives<br />
little or no value at all <strong>by</strong> ensuring the availability <strong>of</strong> the attorney; if the attorney has no<br />
particular reputation or expertise to justify a nonrefundable payment; or if there is "an<br />
abundance <strong>of</strong> other competent attorneys available to handle the client's matter." (See<br />
Opinion 01-02 at subsection C (Unconscionability).)<br />
True retainers exist, but they are not very common. In most cases, advance payments are<br />
just that: advances that cover fees to be earned in the future. And remember that if the fees<br />
are not earned, they must be returned to the client at the conclusion <strong>of</strong> the engagement.<br />
Leigh Chandler and Aaron Shechet are the founders <strong>of</strong> Chandler & Shechet, a businessdevelopment<br />
law firm based in Los Angeles (solutionsllp.com).<br />
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -129-<br />
Printed: June 2, 2010